INSUBCONTINENT EXCLUSIVE:
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Two of the biggest hurdles constraining the world economy have just been
cleared.
Dogged for most of 2019 by trade tensions and political risk that hammered business confidence, the outlook for global growth will
strategy at Medley Global Advisors in New York
economies when projecting the world economy would stabilize into 2020 after a recession scare earlier this year.
But at a minimum, the
agreement between President Donald Trump and President Xi Jinping means some of the more dire scenarios being contemplated just a few months
ago now appear less likely
Bloomberg Economics estimated in June that the cost of the United States -China trade war could reach $1.2 trillion by 2021, with the impact
spread across the Asian supply chain
That estimate was based on 25% tariffs on all United States -China trade and a 10% drop in stock markets.
The phase one deal nevertheless
leaves some complicated issues unresolved, paving the way for fresh clashes as Trump runs for reelection next November
Still to be dealt with are United States complaints over the vast web of subsidies ranging from cheap electricity to low-cost loans that
China has used to build its industrial might
2019 levels (for the United States that would mean 25% on $50 billion in China imports and 10% on another $200 billion) and lowers
uncertainty could boost global GDP for 2020 by 0.6%
A breakdown in talks and higher tariffs -- still a possibility given how past agreements have broken down -- would drag global output down
Conservative Party means Britain is set to leave the EU on Jan
Bloomberg Economics says the result puts a growth rebound in play which, coupled with looser fiscal policy, means activity should accelerate
over 2019.
At the same time, Johnson must now negotiate a new trade deal with the EU by the end of next year, meaning fresh uncertainty
across much of the world is stabilizing as key manufacturing gauges trough
The International Monetary Fund had flagged upside risks to its recent outlook if major trade tensions were resolved.
Policy makers have
signs of bottoming out and Federal Reserve Chairman Jerome Powell said the prognosis for the United States remains favorable
The Chinese government said it would improve the effectiveness of fiscal policy in 2020, while Japan is planning new fiscal stimulus.
Morgan
Stanley economists expect the global economy to recover some momentum in 2020 with growth improving from a trough of 2.9% in the fourth
quarter of this year to 3.4% by the end of 2020 with that uptick driven more by the rest of the world than the United States
