Trump's trade policies undermine US and global economic prosperity: economist

By Gong Yingchun
0 Comment(s)Print E-mail, August 28, 2018
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U.S. President Donald Trump's trade policies are bound to cause multinational corporations to question the market-oriented foundations of the global economy, which in turn will undermine economic prosperity both in America and worldwide, a U.S. economist has warned. 

The national flags of China (R) and the United States [File photo]

"The pending U.S.-China trade war, if it follows the path threatened by Trump, will slow the growth of trade, discourage investment, and take a toll on productivity growth," said Gary Clyde Hufbauer, a senior fellow with the Peterson Institute for International Economics, who told in an e-mail interview.

So far, the trade dispute between the U.S. and China has seen both sides impose 25 percent tariffs on US$50 billion of each other's products. Moreover, the U.S. is holding public hearings regarding proposed tariffs on approximately US$200 billion worth of Chinese products, making the trade tensions between the world's two largest economies even more complex.

Hufbauer noted that "it's too early to say" or speculate on the long-term impact that the escalating U.S.-China trade tensions may have on both the U.S. and global economy. "Nevertheless, the economic prospects are ominous," he added. 

Trade restrictions between the U.S. and China could shave off about one-quarter of a percentage point from U.S. GDP to 2.3 percent in 2019, offsetting some of the gains from its tax cuts last year, said Moody's Investors Service rating agency in its August update to the Global Macro Outlook for 2018-2019.

As for China, Moody's suggested that U.S. tariffs on Chinese goods and China's countermeasures would result in a drop of up to 0.3 to 0.5 percent of China's real GDP growth in 2019. 

However, the agency added that "such measures will likely be met with moderate fiscal policy and liquidity easing measures in China designed to offset most of the growth effects."

"Some of Trump's advisors would like to see the Chinese economy retreat to conditions that prevailed in the 1980s and 1990s. That is not going to happen," he said, adding that Trump will not succeed in winning the trade war by imposing economic sanctions on China or other major powers.

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