A change of trade policy, particularly in the United States, has had a disruptive effect on the global economy, said Dr. Ira Kalish, chief global economist of Deloitte Touche Tohmatsu Limited.
“We’ve already seen a pretty substantial deceleration of economic growth globally … And it has a lot to do with the fact that the U.S. has over the past three years essentially turned inward,” said Kalish when addressing a session titled Global Economic Landscape: A Look at China at the 2020 Consumer Electronics Show (CES) in Las Vegas on Wednesday.
He said the United States has moved from a postwar development in which it promoted trade liberalization and economic integration toward quite the opposite.
The United States withdrew from the TPP, imposed tariffs on China and other countries, undermined the World Trade Organization by refusing to allow the appointment of new members to its appellate body, which no longer can adjudicate trade disputes between countries, the economist pointed out.
Imposing tariffs on foreign goods means U.S. consumers and businesses are effectively paying a higher tax that has a negative impact on their incomes and their purchasing ability. So far the tariffs haven’t had that much of an impact because it takes time, he said, noting that the largest tariffs the U.S. imposed on China only began in May, so the substantial impact will probably appear not too late this year.
He said the trade war has unleashed a high degree of uncertainty. Businesses don’t know if tariffs will go up or slow down, what kind of retaliation will take place if the U.S. imposes similar tariffs that it did on China to other countries like Mexico and Vietnam, which it has threatened to do.
“That uncertainty has evidently had a chilling effect on business investment. And in fact, in the United States, Europe, China and Japan, we’ve seen a possible slowdown in the growth of business investment as well as in the growth of trade,” he said. “And that’s the principal reason why we’ve seen a slowdown in economic growth.”
The growth of U.S. economy has slowed down, principally because of a sharp slowdown in business investment and exports, he said. On the other hand, consumer spending has continued to grow, housing market has rebounded, and those are factors that have enabled the U.S. economy to continue growing at a modest pace.
However, the U.S. industrial production and real business investment growth have slowed down very sharply, and exports overall have showed slowdown as well. All of this is a consequence of the uncertainty about the trade war, he added.
“There’s still some risk of recession in the coming years for the United States largely in consequence of the uncertainty unleashed by this trade conflict,” he said.
When talking about the Chinese economy, Kalish said despite the fact that the economy growth has slowed down, China still holds a lot of promise, and there is a very favorable outlook for the consumer sector in China.
“China is likely to continue growing at a reasonably healthy pace, even though it has slowed down,” he said.
China has gone from being a poor to a middle-income country, so it’s reasonable to expect slower growth, he said. The Chinese government has focused more on stimulating domestic demand, particularly consumer demand, and expanding trade with countries other than the United States, and has sought trade liberalization with other parts of the world.
“So we’re going to see a substantial increase in discretionary purchasing power in China, and that is going to help to fuel the global consumer industry,” he said, noting that China has a rapidly growing middle class and a large number of online shoppers.
It means that China will move away from growth based on exports and investment and more toward growth based on consumer spending. So for consumer-oriented companies, China will be the most important market in the world that will drive the global consumer industry, he said.
Post time: Jan-10-2020