THURSDAY, March 28, 2024
nationthailand

Economies teeter on eve of G20 Summit

Economies teeter on eve of G20 Summit

Donald Trump believes his barrage of tariffs on goods imported from China and Mexico will have their desired effect without crippling global GDP

The new government will likely face increased uncertainties on the global economic front due to a probable slowdown of world GDP growth in 2020, triggered by the United States-China trade war.
While there is still hope that the clash between the world’s two largest economies might be avoided later this month when their representatives attend the G20 Summit in Japan, the potential for further risk should not be under-estimated.
According to the International Monetary Fund (IMF), the US and global economy could take a substantial hit next year, with world GDP losing as much as US$455 billion due to the trade conflict, which translates as half a percentage point. Yet US President Donald Trump has not backed down on his threat to impose more tariffs on Chinese imports, collectively worth another $325 billion, unless he sees progress in talks with China at the G20 Summit or immediately thereafter.
The IMF issued a warning that the US economy itself would weaken as a result of the conflict ahead of the June 28-29 summit. The estimated GDP loss of $455 billion is equivalent to South Africa’s entire GDP.
Already by April, the IMF revised down world GDP growth for this year to 3.3 per cent from 3.6 per cent due to the trade conflict. Meanwhile the Trump administration has also threatened tariffs on imports from Mexico, announcing that a 5 per cent tariff will be levied this month unless Mexico stems the flow of illegal immigrants across America’s southern border.
Clearly the US economy will not be immune to the fallout from the Trump administration’s aggressive tariff measures against major trading partners, with US GDP forecast to slow from 2.6 per cent this year to 1.9 per cent next year.
The White House has faced sharp criticism for using tariff measures to tackle non-trade issues such as illegal immigration, and by doing so threatening the stability of the world economy and hampering growth prospects. This tactic will also lead to counter-measures such as those announced by China, thus affecting the international trade in goods and services and defying the US’ long-standing principle of free trade.
The Trump administration first levied a 10-per-cent tariff on Chinese imports worth $200 billion. Then it raised the tariff to 25 per cent, resulting in China’s decision to counter-punch with a 25-per-cent tariff on US exports to the Chinese market, worth around $60 billion. That came into effect on June 1.
The showdown between the world’s largest and second-largest economies has significantly throttled exports from developing countries such as Thailand, compounding the new government’s challenges in trying to revive economic growth. Additional stimulus will be needed if the trade war worsens following the G20 Summit, since the first quarter’s exports and tourism arrivals have already declined worryingly, especially with regard to impacts from a slowdown in the Chinese economy.
The new government will have to boost domestic consumption and speed up pending infrastructure mega-projects while postponing the introduction of measures that might curb economic growth during this period due to increased external uncertainties.

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