INSUBCONTINENT EXCLUSIVE:
The escalation of tension between the world's two biggest economies, China and the US, will unavoidably have an impact beyond their
China is currently the largest trading partner of the US, while Canada and Mexico are a close second and third
Both China and the US have already imposed tariffs on one another's goods worth billions of dollars, creating uncertainty for businesses
This has weighed on global growth, driving the growing pressure for protectionism.
The threat of an escalation in the trade war is
increasing and at the same time it is affecting trust among economies
Japan is heavily dependent on exports of various raw materials to China
Japanese suppliers of components and materials will face lower demand from Chinese producers of US finished products, ultimately affecting
exports and putting downward pressure on the economy.
Japan has suffered the consequences of a sharp slowdown in exports to China from
January to March 2019, which has possibly resulted in flat quarter-on-quarter GDP growth in Q1 of 2019
Also, the increase of tariffs has certainly dragged the Chinese economy
At the same time, it has also proved to be no honeymoon time for Trump, as US consumers will ultimately have to bear higher costs and it
will erode US corporate profits and push up inflation
Furthermore it would discourage trade, reduce choices at the same time and diplomatic relations and cultural exchanges
Actually, both the economies differ over import duties, subsidies, currency control, intellectual property and cyber security
With the trade war entering its second year, China vows to retaliate against every US move
A trade deal at this stage will certainly provide some respite to the global economy
Actually, due to this tension, now global leaders are facing growing political pressure to enact protectionist measures in their respective
by measures that have affected overseas operations of their multinational companies
It would hurt consumers across the globe making it harder for all companies to operate, forcing them to raise prices for their customers
Undoubtedly, the US economy is much larger than the government, but public policy matters when it comes to growth.
The trade war has cast a
shadow over the global economy and rattled financial markets
Re-ignition of economic growth is the only effective way to avoid protectionist pressures
It is high time economies work aggressively on the broader economic recovery agenda, including counter-cyclical policies, injecting fiscal
and monetary stimulus but with clear exit strategies.