USA are starting to lose. The IMF has predicted the outcome of trade wars

© RIA Novosti / Alexei Vitvitskiy in Photobacterium USA Donald trump at the NATO summit in Brussels. 11 July 2018USA are starting to lose. The IMF has predicted the outcome of trade wars© RIA Novosti / Alexei Vitvitskiy the image Bank

From trade wars waged by the administration of Donald trump, most will hurt the United States, according to the report of the International monetary Fund prepared for the meeting of Finance Ministers and Central Bank governors «Big twenty» in Buenos Aires. On the findings and projections of IMF experts at RIA Novosti.

«All countries will suffer, but particularly vulnerable in the current situation the U.S. economy», — stated in the IMF report.

Fund analysts explain: as Washington sets tariffs for the largest share of imports, the response will follow in the appropriate scale.

«Other countries and regions continue to trade with each other without additional tariffs, allowing them to compensate for the reduction in trade flows with the United States,» — experts underline.

And this is borne out in practice. In mid-July, the EU and Japan signed an economic partnership agreement, which are being progressively eliminated 99% of duties in mutual trade. This will give both Japanese and European producers about one billion euros per year.

In particular, Japan will abolish tariffs on European products — cheese, wine, pork. The EU, in turn, gradually reduces from ten percent to zero import tariffs on Japanese cars.

It will be worse

«The specific implications for each country or region can be ambiguous, the authors of the report. For example, reduced volumes of trade due to the increase in export tariffs. But at the same time, the overall economy will benefit from higher duties on imports.»

The good news: until a trade war is not caused great damage to the economy. The evaluations of the IMF, have already introduced restrictions from the US (import duties on steel and aluminium, as well as additional fee at the rate of 25% on Chinese goods totaling $ 50 billion) and the response of the affected countries will reduce us GDP by only 0.1 percentage point.

If trump promised two weeks ago and impose a ten percent duty on imports of Chinese goods, and Beijing will respond to a mirror, U.S. GDP growth will slow by 0.2 percentage points «While other regions will be able to accelerate the economic growth by substituting American and Chinese goods,» according to the report.

Another scenario considered by the analysts of the IMF, suggests that the White house will impose 25 percent duties on all imported cars. Then the us economy will slow down by almost 0.6 p. p.

In this world most affected Japan, 29% of which exports to the US are cars. The growth of the Japanese GDP in this scenario will slow down by 0.2 percentage points.

Latin America (in its exports to the U.S. cars account for 13%) will lose 0.1% of GDP. It is noteworthy that, according to the IMF, the European Union can benefit from increased American tariffs on car imports.

«Although EU exports to the US car $ 30 billion, is less than one percent of total exports of the European automotive industry — explain analysts. — The direct negative effect of the new tariffs will be more than compensated by the response of European measures.»
All vs all

The greatest challenges, according to the IMF, the world economy will face if the escalation of protectionism dramatically weaken mutual trust in international trade. Unfortunately, the first signs of this are already evident.

On Monday, the Chinese government announced anti-dumping investigation against stainless steel from EU, Japan, South Korea and Indonesia. Such investigations usually — the first step to protective tariffs.

In early July, China urged the EU to joint action in the WTO against the trade policies of Donald trump. With this initiative in Brussels and Berlin were Vice-Premier of the state Council of the PRC Liu he.

Brussels did not support the proposal, suspecting that Beijing is trying to split the Western bloc. And now, it seems that the Chinese authorities are ready for a trade war on the principle of «every man for himself».

According to IMF estimates, the General trade war can slow global GDP growth by 0.4 PP in the first year and 0.5 PP in the future. Japan and Latin America will miss 0.6-0.7 p. p. However, the United States and in this case will lose more than 0.8 percentage points per year.

«The consequences of this development would be terrible, from the destruction of global supply chains to impact on consumers due to the cost of imported goods. Especially strongly affected households with a low income,» warn the experts of the International monetary Fund.

They call to «leave behind doomed to failure rates and the mirror answers,» but recognize that more likely the opposite option.

«Global imbalances may further increase, which will only exacerbate disputes, warns the IMF. — The current account deficit of the United States will increase because the reduction in imports will boost domestic demand at a time when the economy is already running at full capacity. Meanwhile, the surplus in other countries with a developed economy are unlikely to be reduced in the short term. All this will cause serious adjustments in exchange rates and asset prices».

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