Shifting from Petrodollars to Petroyuan?
The US economy, while moving backwards through the cycle, manages to avoid a recession, according to recent reports. However, the outlook for the global economy is less optimistic, as uncertainty caused by Trump's trade policies threatens to underwhelm the global economy.
In his second term, Trump's policies could have significant implications for the global South, as well as for emerging markets and Brics countries. The anticipated economic shocks from Trump's trade policies include a potential global GDP reduction of between 0.7% and 1%, due to the imposition of tariffs on all imports, Canadian and Mexican goods, and Chinese imports. These tariffs would raise production costs, increase consumer prices in the US, and provoke retaliatory tariffs from China, escalating a tit-for-tat trade war.
For emerging markets, the trade disruptions and uncertainties caused by Trump's aggressive "America First" trade policies could reduce demand for their exports, increase supply chain costs, and tighten global financial conditions. The broader slowdown in global trade growth worsens the outlook for economies dependent on exports and global value chains.
Regarding China, Trump's second term shows a continuation and escalation of confrontational trade policies, including new tariffs, sanctions on Chinese companies, potential revocation of China’s Permanent Normal Trade Relations status, and a more transactional, unpredictable approach prioritizing short-term gains. China faces increased pressure to pursue economic self-sufficiency while navigating a deteriorating bilateral relationship that impacts its export sector and growth trajectory.
Meanwhile, the resilience of the US economy is crucial for global growth. Jared Franz, an economist at Capital Group, may have insights into this matter.
Saudi Arabia's decision to join Project mBridge could have significant implications for the current dollar-based financial system, as discussed by Mark Sobel, US chair of OMFIF, and Max Castelli, head of strategy, sovereign institutions, UBS Asset Management.
On a positive note, emergent market debt provides a case for diversification, as stated by Nicholas Hardingham, portfolio manager, and Stephanie Ouwendijk, portfolio manager and research analyst, Franklin Templeton Fixed Income.
In a separate development, Joachim Nagel, president of the Deutsche Bundesbank, will deliver a lecture on the natural rate of interest, its measurement, historical evolution, current uncertainty, and implications for policy-making in the coming years.
Beijing is prepared to respond with countermeasures against US trade policies, according to Zongyuan Zoe Liu, Maurice R. Greenberg senior fellow for China studies at the Council on Foreign Relations.
In conclusion, Trump's second-term trade policies are anticipated to induce recessionary pressures globally, hit emerging markets through weaker trade and capital flows, and intensify economic confrontation with China, requiring Beijing to rapidly adapt to heightened economic and geopolitical challenges.
- The ongoing trade policies of Trump's second term could have significant implications for global governance and public economy, particularly for the global South and emerging markets.
- The global economy might face a potential GDP reduction of between 0.7% and 1% due to Trump's tariff policies, which could lead to increased production costs, consumer price hikes, and retaliatory tariffs, escalating a trade war.
- For emerging markets, the disruptions and uncertainties arising from Trump's aggressive trade strategies could result in reduced export demand, increased supply chain costs, and tightened global financial conditions.
- China, in responding to Trump's policies, faces increased pressure to pursue economic self-sufficiency, navigate a deteriorating relationship with the US, and adapt to the impact on its export sector and growth trajectory.
- In light of Trump's trade policies, the resilience of the US economy is crucial for global growth, and insights from economists like Jared Franz could provide valuable perspectives on this matter.
- Debt from emerging markets offers a case for diversification, according to Nicholas Hardingham and Stephanie Ouwendijk, highlighting the potential benefits during times of global economic instability.
- As part of the general-news landscape, findings from research, meetings, and finance and business sectors succinctly illustrate the complexities and nuances surrounding Trump's second-term trade policies and their broad effects on the global economy.
