August 25, 2019

Trade Wars Stoke Economic Fear as G-20 Finance Ministers Gather in Japan

Christine Lagarde, the managing director of the I.M.F., warned on Wednesday that the recently announced tariffs that the United States and China had put on each other’s imports could reduce global gross domestic product by about 0.3 percent in 2020. When including the tariffs that were already in place, global G.D.P. could be reduced by 0.5 percent, or $455 billion, next year.

“These are self-inflicted wounds that must be avoided,” Ms. Lagarde wrote in a blog post. “The fact is that protectionist measures are not only hurting growth and jobs, but they are also making tradable consumer goods less affordable — and disproportionately harming low-income households.”

The trade wars are also unnerving financial markets. Investors are worried that business investment could stall and that central banks will have to cut interest rates.

At the Institute of International Finance conference, banking executives expressed unease about the trade tensions.

“If you’re a C.E.O., it’s pretty hard to be particularly aggressive and ambitious in making MA strategic decisions or capital decisions,” said John Waldron, president and chief operating officer of Goldman Sachs. “You have to be much more cautious and a little bit worried right now.”

Mr. Waldron said that the swoon in sentiment started in early May when Mr. Trump tweeted that more China tariffs were coming. He predicted that the best-case scenario was that Mr. Trump and Mr. Xi would restart negotiations.

But Mr. Trump appears to be unfazed by the economic fallout from his confrontational approach with China and others.

“Ultimately this is going to be about Washington making a decision about how it’s going to proceed,” Timothy D. Adams, the president of the institute and a former senior Treasury official, said in an interview. “I think the business community’s voice has become somewhat diluted on these issues and I’m not sure the president cares what the business community thinks.”

Article source: https://www.nytimes.com/2019/06/07/business/economy/g20-trade-war-trump-tariffs.html?emc=rss&partner=rss

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