UK, May 15, 2018.- The dynamics of the large economic blocs in the world are very sensitive to political decisions and the initiatives of corporate corporations, among other factors. Any modification affects our pocket, we pay more for some products, we raise direct taxes and indirect taxes, higher uncertainties in pension systems, etc. For example, if the United States moves towards the protectionism of its economy and raises tariffs on imports of products from different economic areas, it will affect our particular economy. If there is a trade war between the West and the East, it will affect our particular economy. Undoubtedly. Nor should we forget the real arguments behind each war, for the most part, economic interests. Although this is reason for another analysis.
I just read a recent Focus Economics report entitled: Economis Snapshot for the G7 Countries. FocusEconomics is a leading provider of economic analysis and forecasts for 127 countries in Africa, Asia, Europe and the Americas, as well as price forecasts for 30 key commodities. The company is supported by an extensive global network of analysts. Since its launch in 1999, FocusEconomics has established a solid reputation as a reliable source for timely and accurate business intelligence among Clients from a variety of industries, including the world’s major financial institutions, multinational companies and government agencies.
They insure from Focus Economics:
The economic fundamentals that led global growth to post the strongest expansion in six years in 2017 remain firmly in place. A preliminary GDP dataset showed that the global economy expanded 3.5% annually in Q1, matching both last month’s estimate and the expansion recorded in Q3 and Q4 2017. A solid trade cycle, relatively accommodative financial conditions and resilient private consumption in the wake of historically low unemployment rates in most large economies, including Japan and the United States, were the main factors behind Q1’s robust growth rate.
According to Focus Economics: The U.S. economy expanded at a strong rate in Q1, led by robust export and investment growth. While private consumption performed poorly in the quarter mostly due to bad weather and delayed tax refunds, household spending should recover in Q2 onwards on account of upbeat consumer confidence, a healthy labor market and tax cuts. China, meanwhile, continues to defy any sign of an economic slowdown, as household spending remains strong and factories benefit from robust global demand. China is not only posting astonishing growth rates but also successfully transitioning towards a more sustainable economic model, with services and private consumption taking the helm of economic growth.
While China and the United States are delivering stronger-than-expected growth rates, recent trade disputes between the two countries could undermine their enviable growth trajectories. In early April, China implemented tariffs on 128 American products worth USD 3.0 billion in response to U.S. duties on aluminium and steel imports. While no additional levies have been implemented since then, the war of words between the two countries continued in recent weeks, with both proposing USD multi-billion tariffs. China, however, is slowly adopting a more conciliatory tone, and President Xi Jinping stated on 10 April that the Chinese government is considering opening the country’s economy further and lowering import duties on certain products including cars. Nevertheless, officials also vowed to respond to any additional trade measures against the country.
Meanwhile, growth appears to be weakening in the Eurozone, with economic sentiment falling in Q1 and industrial production declining in the first two months of the year. In Japan, the economy likely lost some steam in Q1, but momentum is expected to pick back up in Q2. Preliminary GDP data for the UK shows the economy decelerated sharply in Q1 amid adverse weather conditions and concerns about Brexit. Despite the approval in March of a set of guidelines for the transition period following the UK’s exit from the EU, some hurdles, such as the Irish border and the country’s degree of access to the EU market, still have to be cleared in order to ensure a smooth breakaway. Meanwhile, it has yet to be seen if Prime Minister Theresa May will have enough support in parliament to pass the final Brexit package.
Despite signs that global trade flows may have peaked in Q1 and loud trade war drums are beating, our analysts are still positive about the outlook for the global economy. They project that global growth will reach 3.5% for the fourth consecutive quarter in Q2.
The global economy entered 2018 on a solid footing mostly due to healthy trade dynamics, which are translating into strong overseas shipments, resilient manufacturing activity and tighter job markets. Moreover, global financial conditions remain loose, despite the tightening cycle in the United States, and governments are spending again following years of austerity. Nevertheless, U.S. President Donald Trump’s protectionist rhetoric is slowly becoming tangible action, risking to derail one of the main engines of global growth. While the impact has been limited up until now, a full-blown trade war is still a possibility. Moreover, the risk of overheating in the United States could force the Federal Reserve to accelerate the pace of its interest rate hikes, which would negatively reverberate across financial markets, particularly among emerging-market nations.
FocusEconomics panelists see the global economy expanding 3.4% in 2018, which is unchanged from last month’s estimate and would represent the strongest rate in seven years. In 2019, the global economy is expected to expand at a broadly similar rate of 3.3%.
This month’s stable outlook for the global economy reflects unchanged growth prospects for Japan, the United Kingdom and the United States. A weak start to the year prompted our panel of analysts to downgrade their view of the Euro area economy, which represents the first downward adjustment to its economic outlook for 2018 in nearly two years. Canada’s economic outlook was also downgraded this month.
China’s resilient economic growth, a strong global trade cycle and improving dynamics in India are supporting economic activity in the Asia (ex-Japan) region. Eastern Europe, meanwhile, is benefiting from the ongoing economic recovery in Russia, solid growth among some key regional economies such as Romania and Turkey, and resilient dynamics in the European Union. While the economic outlook in Latin America appeared to be more stable in recent months, political uncertainty in some countries continues to dent the region’s growth projections. In the Middle East and North Africa, and Sub-Saharan Africa regions geopolitical risks and economic imbalances persist, but higher commodity prices are shoring up the outlooks.
In the following video we check the possible consequences of putting tariff barriers, instead of liberalizing international trade: