July 4, 2020
AliExpress WW
Global Trade Recovery Could Be Weakened By Multiple Disputes

Global Trade Recovery Could Be Weakened By Multiple Disputes

AliExpress WW

Submitted Christoph Barro

AliExpress WW

According to the PBC of the Netherlands Bureau for Economic Policy Analysis, in April there was an “unprecedented” decline in world trade as major economies suffered from severe restrictions due to coronavirus. The volume of world trade in goods in April fell by 12.1% per month (the largest monthly decline since the beginning of records in 2000). On a three-month moving averageThe index also fell 7.2% in April (the largest decline since March 2009) and should decline even more in May.

However, the WTO Director General, Roberto Azevedo noted which the “The drop in trade that we are now observing is historically large – in fact, it will be the steepest in the history of observations. But there is an important silver lining: it could be worse“. In detail, the latest WTO report emphasized that “In light of the second quarter trade data, the pessimistic scenario of the April forecast, which assumed even greater medical and economic costs than the one that took place, seems less likely,

In fact, recent high-frequency data show that the worst seems to be behind (if there is no second wave of coronavirus at the end of this year) when the Baltic Drought Index recovers from late May / early June. If you look at the 20-day moving average, the index may even become positive year on year in early July.

The ongoing normalization (resumption) in China, the Eurozone, some US states and Asian countries suggests that both private investment and household spending will mechanically recover from 3Q20, so that global trade growth will end in almost two years of recession.

However, with the exception of certain risks, such as the second wave of coronavirus, several trade disputes may slow recovery. First of all, the long clash between the US and China. Despite positive comments from US officials, recent data have shown that even if China significantly increases its purchases of US goods, it will be far from meeting US needs as defined in the “first phase” agreement.

As a result, US officials may be tempted to increase pressure on Beijing in the near future to support US GDP in the 3rd quarter immediately before the presidential election (November 3). However, Chinese officials will probably not agree to further tensions between the two countries. In the short term, investors will have to focus on lobster production. According to press reports, White House trade adviser Peter Navarro said Donald Trump is heading US sales representative Robert Lighthizer. inform before July 15 whether China is starting to fulfill its $ 150 million lobster purchase commitments under the “first phase” agreement. If not, Trump told Lighthizer to consider introducing reciprocal tariffs on the Chinese seafood industry.,

At the same time, tensions between the US and Europe should be carefully examined. According to Bloomberg, “Transatlantic relations could hit new lows next month as the European Union prepares billions of dollars worth of US exports targeting politically important industries for President Donald Trump and his Republican allies in Congress. The EU asked the World Trade Organization to give it the green light to levy US $ 11.2 billion in fees on US products. USA in connection with a lengthy dispute over aircraft subsidies. The decision is expected in July and the EU plans to target coal producers, farmers and fisheries, in addition to aircraft and parts manufacturers“.

Recently, Bloomberg also reported which the “The European Union has come close to recommending that travelers from the United States should not be allowed to enter the block even after July 1st.” In the context, “European diplomats are gearing up for President Donald Trump to be unscrupulous about keeping the Americans away, while letting the Chinese enter.

Separately, another dispute arose in Asia. Bloomberg showed it “India plans to introduce strict quality control measures and higher tariffs on imports from China“, as military confrontation between neighbors threaten economic ties. In detail: “The State Bureau of Indian Standards is finalizing stricter standards for at least 370 products to ensure that items that can be produced locally are not imported,” people said, asking them not to mention them, citing on the rules. Products include chemicals, steel, electronics, heavy equipment, furniture, paper, industrial equipment, rubber products, glass, metal products, pharmaceuticals, fertilizers and plastic toys. They also discuss the issue of increasing the import duty on goods, including furniture, compressors for air conditioners and automotive components. ”

Other disputes with the USA are not excluded. reintroducing aluminum import tariffs from Canada. Therefore, in the short term, it seems that the risks look skewed towards a slower recovery in world trade than expected.


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