Here's a summary of what analysts are saying approximately the brewing trade war among the world’s two biggest economies.
Global markets have dropped sharply after China retaliated against Donald Trump’s decision to impose tariffs on steel and aluminium, fueling fears of an all-out trade war between the world’s two largest economies.
Any sharp escalation of the US-China change conflict is probable to tug down global alternate increase and hurt India, even though, in its gift form, the face-off between the world’s biggest economies might not jeopardize the USA's export prospects. Analysts said international agencies may soon start revising down their growth projection for global trade if the situation escalates. Only in January, the International Monetary Fund had raised its growth forecast for global trade by 0.6% and 0.5% for 2018 and 2019, respectively, from its earlier forecasts to 4.6% and 4.4%.
One of the major drivers of this growth was an upward revision in the global economic expansion, led by the US. US President Donald Trump’s plans for tariffs on up to $60 billion in Chinese goods in his bid to address his country’s $375 billion goods trade deficit with China has already prompted the world’s second-biggest economy to propose a list of 128 US products as potential retaliation targets. US goods with an import value of $3 billion in 2017 could be targeted. These goods include wine, fresh fruit, dried fruit and nuts, steel pipes, modified ethanol, and ginseng.
US consumers would bear the brunt of the immediate damage in the form of inflation, as the prices of China-sourced consumer products and components would be expected to rise sharply. “The shelves of your average US retail outlet are filled with clothing, footwear, toys, appliances and other goods produced mainly in China,” says Mr. Capri. “US consumers would feel considerable pain from any kind of retaliatory tariff war between the two countries.” In this scenario we estimate US consumer price inflation overall to be 0.9% higher in 2017, and 1.5% higher in 2018, compared with our baseline US forecast. Private consumption growth out to 2021 would be well below that forecast in the baseline scenario.
Private consumption growth in China is already locked in decline, and the additional hit to consumer sentiment from a trade war would not accelerate that trend materially. The impact on Chinese consumers, by contrast, would be modest. One reason is that the US is not a major source of consumer goods imports, aside from some luxury brands.
Beyond the risk of a far-attaining trade conflict, economists have warned US purchasers are possibly to undergo the cost of the tariffs and concerns approximately Chinese retaliation are mounting. A senior administration official said the administration believed the tariffs would result in only "minimal effects" on US consumers.
A trade war wounds all combatants. It rattles business and consumer confidence, restrains exports, and hurts growth. Many U.S. businesses rely on low trade barriers to create international supply chains that reduce costs and increase efficiency. These could come apart amid the new tariffs. The last time the United States imposed sweeping tariffs, in the 1930s, the effect was to prolong and worsen the Great Depression.