Probability of Global Recession Surges with Accelerated Trade Wars, Tariffs
According to the International Monetary Fund’s managing director Christine Lagarde, the ever-increasing rift between US-China trade war, which is getting worse with each passing day, will not cause a global recession. But, the trade war and tariff threats could depreciate the global growth in 2020.
Lagarde on Wednesday claimed that the present and the speculated tariffs on Chinese goods can reduce the global GDP by 0.5 percent in 2020, which amounts to about US$455 billion, much bigger than the economy of the South Africa. Similarly, possibilities of a no-deal brexit or hike in the oil prices might further dampen the global economy.
While global recession might not be a possibility, an economic breakdown is. The prime example of such a possibility is that the corporate debt levels have risen to a threshold and any sudden change in the monetary circumstance might prompt turbulent capital effluent from developing markets.
According to the article by Lagarde and her interview with the media on Wednesday, recession is not a possibility as of now, since the estimates on trade wars and tariffs are to affect the income and development, but won’t cause a meltdown of jobs globally.
However, the estimates of global recession or depreciation don’t include the tariffs imposed by the US President on the Mexican goods to curtail the immigration issues. With the monthly increasing tariffs on the Mexican goods, the US has led itself on a path of inflicting self-injury. The prime reason for this analogy might be that the most affected sector from such tariffs would be the retail trade sector.
Lagarde in her interview said, “We don’t see a recession. Decelerating growth, but growth nonetheless — 3.3 percent at the end of this year, and certainly a strong U.S. economy. We do not see at the moment, in our baseline, a recession.”
While the IMF managing director does not believe global recession to be happening anytime soon, according to the US analysts, the tariffs on Mexican goods alone can lead to the loss of almost 400,000 jobs. This certainly leads to the speculations on probable chances of recession occurring.
While the chances of a global recession are low, it is certain that the trade wars and imposed tariffs will negatively impact the development across the globe.
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