Federal Reserve Report: Trade War or about 1percent of GDP shrinkage in the United States

 Federal Reserve Report: Trade War or about 1percent of GDP shrinkage in the United States

In addition to tariff measures taken in the trade war, companies complain that their investment and hiring decisions are hampered by uncertainty because they do not know when prices will rise, whether or how much, and which foreign buyers may suddenly be lost.

Fed researchers wrote in their analysis that uncertainty has sharply increased since 2018, in parallel with the decline in world industrial production and global trade. Due to the multiple escalations of uncertainty, the drag on gross domestic product (GDP) is expected to increase until early 2020, with the ultimate impact of more than 1%.

The study finds that GDP in developed and emerging economies has fallen by about the same amount.

According to the Wall Street Journal website on September 5, a new study by Fed economists shows that by early 2020, uncertainties in trade policy may reduce U.S. economic output by more than 1%.

Reported that this is the first time that Federal Reserve researchers have tried to quantify the impact of increased uncertainty in the Trump administrations trade policy.

In 2018, Trump imposed tariffs on imported steel and aluminium products. In May, months after new trade agreements were reached with Canada and Mexico, Trump threatened to impose new tariffs on Mexico to curb immigration flows along the US-Mexican border. He also threatened to impose tariffs on Europe.

The Federal Reserve released its research report online on April 4. With the increase of uncertainty in trade policy in 2018 and 2019, the growth of the world industrial production index slowed down, the report said.

Researchers found that trade policy uncertainty began to increase in the first half of 2018, reducing US and global economic output by about 0.8% in the first half of 2019. They further reckon that recent increases in uncertainty will reduce U.S. output by more than 1% in the first half of 2020.

Six Fed economists who conducted the study concluded that the evidence suggests that increased trade policy uncertainty has a negative impact on GDP and investment, and these effects are expected to continue.

The report also responded to President Trumps efforts to shift focus by blaming the Fed for financial market volatility and economic risks in his eyes, rather than trade wars.

In addition, according to Reuters on September 5, French Minister of Economy and Finance Bruno Lemmel said in an interview on September 5 that trade tensions between the United States and China would reduce global economic growth by 0.5 percentage points next year.

Lemmel told the French newspaper The Crucifix that the trade war between the worlds two largest economies poses the greatest threat to global economic growth.

The tariffs imposed by the United States on Chinese goods and the retaliatory measures taken by China will have a negative impact of 0.5 percentage points on global economic growth by 2020, Lemmel said.

Source: Reference News Network Responsible Editor: Wang Xiaowu_NF