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US-China trade war uncertainty could cost $585 bn by 2021

22
Aug '19
Pic: Shutterstock
Pic: Shutterstock
Uncertainty arising out of the US-China trade conflict could lower world gross domestic product (GDP) by 0.6 per cent in 2021, relative to a no-trade-war scenario, according to Bloomberg Economics. That is double the direct impact of the tariffs and the equivalent of $585 billion off the International Monetary Fund’s estimated 2021 world GDP of $97 trillion.

The Bloomberg Economics report was drafted by Dan Hanson, Jamie Rush and Tom Orlik.

The analysis showed China would be hit harder by the uncertainty factor, with its GDP lower by 1 per cent compared with a 0.6 per cent chunk taken out of the economic output of the United States, the news agency reported.

A survey released last week by the Federal Reserve Bank of New York found a growing conviction among businesses that tariffs were hitting their bottom line. The Fed responded to economic headwinds with a rate cut of 0.25 per cent last month.

The Bloomberg Economics report said that while monetary policy can be used to mitigate uncertainty shocks, it cannot prevent the damage entirely. If central banks respond to demand weakness, world GDP will be 0.3 per cent lower in 2021 than it would be in a no-trade-war scenario. (DS)

Fibre2Fashion News Desk – India


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