Business war and the next economic recession

Dr.. Haidar Hussein Al-Tohma


A decade has passed since the outbreak of the global financial crisis in 2008 and the severe collapse of most markets and financial institutions in all countries of the world, especially industrial economies and emerging markets. Despite all the multilateral measures taken to curb the economic downturn and save the global economy from sliding into the Great Depression, the recovery did not move the pace of growth and economic stability as quickly as needed to reach the safety barrier.

A decade ago, as the financial crisis dwindled, many feared that countries would seek to create new trade barriers that would restore the scenes of the 1930s and other recessionary periods following world wars. However, trade restrictions have largely been avoided due to WTO and G20 intervention to facilitate multilateral cooperation. Global trade has not shrunk by the dimensions of the global crisis; by 2011, trade rates have recovered and have returned to pre-crisis levels.

Economists are aware of the significant role of trade in the resumption of global economic growth because of the role of the multilateral open trade system as a driver of growth and stability. World trade since the Second World War has been growing at a rate of 1.5 times faster than world GDP growth.

Today, after a decade of financial and economic collapse, new fault lines have begun to threaten the structure of the global economy as a result of weak fiscal regulation, the consequences of excessive inequality, escalating global imbalances and political tensions in the Middle East. More dangerous than that is protectionism and closed policies that have been raised recently. US President Donald Trump launched a trade war by imposing import tariffs on America's main trading partners. More recently, another $ 200 billion in Chinese exports has been announced, which will come into force on Sept. 24. US President Donald Trump is also threatening to impose a 20 percent tariff on cars imported from the European Union.

Trump believes that these fees will help improve the US trade balance, without realizing that the prevention of foreign goods from entering the US market, also means the recession of US goods. The discriminatory tariffs will fail to achieve the Trump's stated goal, as the reduction of bilateral trade imbalances between the United States and other countries. Represents the current account balance of any country, the difference between domestic savings (public and private) and domestic investments. Unless savings increase or investments fall, the current account gap can not be narrowed.

US tariffs have already undermined global economic growth and weakened the World Trade Organization. In the world of supply chains and cross-border supply and increasing interdependence, the unnecessary disruption of the iron and steel trade will lead to a decline in production not only in the exporting countries, but also in the United States. The seriousness of the situation is exacerbated by the possibility that other States will take retaliatory measures.

"The real danger for Europe is the lack of a strategic response to Trump's" America First "program, according to the Oxford Economics Institute. Experts agree that a commercial war will actually occur if the United States carries out its threat to impose tariffs on its imports of cars, which "will hit the engine of international trade at heart."

Any attempt to undermine global trade, the main engine of global economic growth since the end of the Second World War, would have dire economic consequences and high costs for all, including the United States of America. Beyond the United States, the international community must address the Trump policies and reaffirm the principles of the open multilateral trading system before it is too late.

https://annabaa.org/arabic/economicarticles/16681