As The US and China Trade 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 global recession in the last decade. As the trade war between China and the US increases, investors are demanding politicians and bankers to act quickly to avoid or slow down recession. A professor at Harvard University predicts a 50% chance of the US getting hit by a recession. US Treasury secretary said the risk of recession has considerably increased over the last couple of months. The executive has also functioned as an economic advisor for the white house.
The central bank of New Zealand lately dropped its benchmark rate by 50 basis points, which accounts twice than the prediction. Even more, India, one of the fastest-growing economies, has lost its rate by 35 basis points. The yield curve for the US, along with 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 tax won’t be very high. But the situations created by the trade war could affect investments, including consumption of products from a foreign country.
Even more, there are significant downsides of this war. If this trade war goes on and escalates, it would damage the financial condition of organizations in both countries. 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 US has also experienced the slowdown. 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 because its weakened yuan has passed seven against the US dollar after 11 years.