Recession fears: How trade war is taking on global dimension
June 05 2019 01:24 AM
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For sure, these are tough times for the global economy amid growing recession fears.
The trade dispute between the Trump administration and China has escalated as each side blames the other for the breakdown in talks. 
More importantly, the trade war is taking on a global dimension amid simmering tensions between the US and the European Union, while US President Donald Trump is threatening to impose more tariffs on Mexican goods in response to illegal immigration.
The economy is already feeling the heat. Global manufacturing took another hit last month from trade tensions, adding to concerns that the world economy is weakening.
The latest signs of factory weakness - in countries including South Korea, Germany and Japan - underscore the growing threat to the world economy posed by the escalating US-China trade war. 
The reports come amid a fresh warning from Wall Street about recession risks.
A global recession could start within nine months if Trump imposes 25% tariffs on an additional $300bn of Chinese exports and Beijing retaliates, according to Morgan Stanley. JPMorgan Chase & Co said the probability of a US recession in the second half of this year had risen to 40% from 25% a month ago.
“Global growth now looks likely to slip below trend for the rest of this year,” according to a JPMorgan report.
Also sounding the alert, economists at Goldman Sachs Group said they now expect the US to impose 10% tariffs on the remaining $300bn-worth of imports from China and on all Mexican goods, too. The bank lowered its US second-half growth forecast by about half a percentage point to 2% and said its sees a greater likelihood of interest-rate cuts from the Federal Reserve.
It’s now looking more certain that the rising costs brought about by the trade war will be felt across the global economy. Prices will rise for American consumers in some cases, hurt Chinese and American corporate profits in others, and drag down growth of nations caught in the crossfire should the global expansion decelerate.
An International Monetary Fund blog in May concluded that “consumers in the US and China are unequivocally the losers from trade tensions.” The IMF has warned that the global economy remains vulnerable to trade tensions and urged governments to be “very careful.”
A key theme of Trump’s election campaign was “China’s gain is America’s loss.” Amid his outburst against cheap Chinese imports weighing on US jobs, and with trade hawks in his team, protectionism sure will have its toll, not only on both sides, but across the world.
Some economists predict a world recession and a renewed race to the bottom on interest rates if trade tensions fail to ease at a Group of 20 summit in Osaka, Japan, at the end of June, when Trump and Chinese President Xi Jinping could meet.
Make no mistake, in a globalised world, no country can ensure quality growth with inward-looking isolation and restrictive trade protection. A full-blown tariff conflict could cut about $600bn off global growth by 2021, according to Bloomberg Economics.




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