As The US And China Tade War Intensifies, The Global Economy May Get Hit By A Recession
The trade war amongst several nations, including the most significant GDP contributors in the world, US and China are transiting the world economy to a recession. It would be the first recession in the last ten years. As the trade war between China and the US intensifies, investors are demanding politicians as well as bankers to act quickly to avoid or slow down recession. A professor at Harvard University predicts a fifty percent chance of the US getting hit by a recession. US Treasury secretary who was also an economic advisor for the white house recently said, risk of recession has considerably increased over the last couple of months.
The central bank of New Zealand lately dropped its benchmark rate by 50 basis points. This reduction was twice than anticipated. Even one of the fastest-growing economies, India has dropped its rate by 35 basis points. The yield curve for the US as well as Germany has been showing alarming signs of downturns in the economy. Economists are predicting various possibilities on how the recession would hit the world. Donald Trump has recently spoken about imposing a whopping 10% tariff on US$ 300 billion of Chinese goods. Direct costs of the tariff won’t be very high. But due to situations created by US and China trade war, it could affect investments as well as consumption of goods from a foreign country.
There are significant downsides of this war. If this trade war goes on and escalates, the financial condition of organizations in both countries would be tighter. Industrial production in Germany, which is Europe’s biggest economy, has experienced a maximum fall down in a year. The central bank of Europe is expected to reduce the rate further to resist slowdown. The slowdown has been observed in the US as well. Some companies have reduced their forecasted earnings. Cutting down rates further may not be possible for bankers. US treasury has recently decided to declare China as a currency manipulator. This was done because china weakened yuan past 7 against the US dollar after 11 years.