How Trade War Can Affect the Growth of World’s Economy?

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The battle between the US-China trade war again impacts the companies in October. With the US products trade deficit narrowing to the lowest level in more than a year. Thus, as a result, there was a huge drop in imports noticed- mainly for automotive & its parts and consumer goods.

Courtesy- Business Standard

With the impact it comes with both side of the coin, good and bad news:

Good about it: The drop in imports is temporary because automobiles’ intake goes low after the General Motors strike in the US. And consumer goods demand slowed during a new and fresh tariff in September. Both departments are expected to recover from this phase in the coming months.

What affects: The cross border trade is weakening overall and due to trade war the companies are slowing down.

The current tariff battle between the two big nations has been swinging as levies, threats and brings to the negotiations point of view where companies have front-loading orders one month and delaying new orders which are affecting the supply chain and can affect the economy as well.

The U.S. added 15% tariffs from Sept. 1 on $110 billion in Chinese imports, including popular purchases such as the Apple watch, clothing, shoes and many other products. As a result, imports of the items from China dropped in September, and it can repeat the same if that’s continued in October.

Barclays increased its estimate for fourth-quarter GDP growth to 1.6% and Amherst Pierpont Securities bumped it’s up to 2.7%. Macroeconomic Advisers increased their GDP tracker to 1.9% for the last final three months of the year. Even though if the numbers are respectively good but the overall trend is still negative, according to Barclays. In October US exports are also declined with the lowest since the start of 2018.

Courtesy- Economic Times

With the narrower trade deficit, the GDP of both nations can affect vast for the longer term. Both countries are the major leaders in importing and exporting of goods.

The products of China cover 60-70% of approx. of the goods in Asia, the Middle East, and Europe. If the trade war continues for a longer period of time then it may directly affect the world economy all at once. Whereas, the US authority is imposing a hefty tariff amount on Chinese goods thus the price of the products getting high and indirectly with the rise in price the demand decreases.

What is the Solution?
The easiest way for both nations is to review the tariff structure and make an easy policy of cross border trading of goods. In reality, it is not possible for one nation to manufacture each and every product within a country. Somehow due to demand every country needs to practice import and export.
For the easy flow of the country’s economy, it is important to exercise and revise the rules across cross border trade.

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