Rising Trade Worries Between US and China to Hamper Global Growth, Says IMF

  • Oct 10, 2018 AEDT
  • Team Kalkine
Rising Trade Worries Between US and China to Hamper Global Growth, Says IMF

The impacts of the battle between the two largest economies is likely to be felt on other economies as well. Josh Frydenberg, treasurer of Australia, is of the view that the trade battle between the US and China needs to come to an end as the Australian economy would not be spared and soon the impacts would be felt on the economy as a whole. The stronger US economy, dollar appreciation have been severely impacting the currencies of the emerging economies which could, in turn, dent the growth of a particular emerging economy.

The economic growth of Australia has been downgraded sharply by International Monetary Fund, IMF for the next year because the trade worries are not ending and are escalating which raise the concerns. Josh would be meeting Steve Mnuchin, US Treasury Secretary, and would try to convince him that there is a pressing need to call off the trade wars. The trade battle is getting even worse as the time is passing by. In 2019, the Australian economy is expected to witness a decline in their growth as compared to 2018. According to the treasurer of Australia, the broader economy has witnessed a little impact. He stated that still, the trade worries need to end as soon as possible as this would help Australia as well as the global economies. According to him, more employment, increased economic growth as well as investment would be seen only when the free trade is being allowed. 

The IMF is of the view that the stock prices in the United States have witnessed a strong momentum in the past year thus, indicating that the investors have braced themselves to the risky environment which is currently prevailing. However, if immediate action to control the trade wars is not taken, in no time the sentiments of the investors might take a U-turn thus boosting the sell-offs from the equities. The overall impact on the global economies is negative as the business confidence might get hurt if further escalation in the trade battle is witnessed. The International Monetary Fund has lowered the expected global growth for the present as well as the next year by 0.2 percentage points. It, thus, currently stands at 3.7%. The fund has also decreased the expectations regarding the good and services trade.

The IMF also threw some light in the emerging economies which are currently struggling. The significant capital outflows have been witnessed from Argentina as well as Turkey on the back of increased rates in the United States. These countries witnessed a strong downward momentum in their currencies against the US dollar. Moreover, the impact of the appreciation of the US dollar has also been felt on the Indian currency which has been struggling a lot lately. The elevated oil prices, fears over the current account deficit are the primary reasons which are presently impacting the Indian economy.

The International Monetary Fund has also reflected their views on the Chinese economy. They stated that China’s financial conditions have remained stable because of the recent decision of the People Bank of China. The Apex bank eased the monetary policy.

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