Protectionism Gives Wings To a Recession In The US That Could Spread The World

Immersed in full economic slowdown, the US economy begins to show its most vulnerable side. After an historical, at the same time epic, harvest of years growing at very high real growth rates, the latest GDP revisions, collected after the reading of the second quarter of the year, show us a priori growth more off than expected. The dynamism enjoyed by the US economy has begun to moderate, while, on the other hand, the global balance of risks continues to deteriorate.

The commercial war, where the United States represents the purest epicenter of it, continues to shake the United States economy with force, harming itself by the president's own efforts.

Trade tensions, which have not stopped happening between Washington and Beijing, have ended up deteriorating one of the main engines of growth of the world economy, causing a more than pessimistic reading of the World Trade Organization (WTO), as well as the OECD


Commercial transactions between countries, caused by a globalized scenario, represent one of the main aggregates to World GDP. With a representation of 57% of world GDP, international trade caused, with continued and interannual growth, that the global economy, as a whole, thrive at the rate that exports and imports did. Exports that, in the face of commercial tensions, have completely ballasted the foreign sector, leading to recessive levels those economies most exposed by their degree of dependence.

Cases like Germany, where the foreign sector has a weight in its economy close to 80% of GDP, are an example of how dangerous a protectionist policy can be in a country, as well as the adverse effects it can generate in some countries. In this case, when the external demand suffers a sharp fall, completely paralyzing the volume of global trade, those economies that have a greater subordination to it have been severely affected, hampering the growth of their economy and their future development if they are not Find a feasible solution.

However, for Trump, in his eager mania to end China's supremacy and correct trade balance defaults, he began a protectionist policy against China, with tariff surges in the form of taxes, to curb the presence of the Chinese product in the country. A tariff surge that, resulting in a trade war, has ended up splashing the United States and, as if that were not enough, deteriorating the trade balance in the country with greater incision. A balance that a few months ago reached a record high in deficit.

Now, as we indicated, although the United States was confident that this was not going to end up splashing its economy, the truth is that, observing the readings of the PMIs, the GDP revisions, as well as other indicators of economic health, we can observe how the deceleration, added to the progressive uncertainty, has damaged as expected to the US economy. An economy that began the year growing at rates of 3.1%, while expecting to end up leaving almost a whole percentage point.

At the same time, great things are not expected for 2020, where the forecasts published by the Fitch rating agency this week showed a slowdown that will reduce the growth rate to a possible 1.7% for next year.

In summary, the reduction in exports, as well as the reduction that private investment has suffered, is causing the growth in the country to be suffering this loss of dynamism. The growths, completely decelerated, are ending industrial production, as well as other sectors that are seeing a great loss so far this year. Also retailers, who are going through one of the worst crises in their history. Situation that could lead the country to a beginning of job destruction; just at a time where the rate marked maximums within its full employment rate.

A few weeks ago, the Federal Reserve (Fed) expressed its concerns regarding the economy and initiated another interest rate reduction, leaving in limbo the possibility of a third, if the economy so required. A rate reduction in order to stimulate a stifled and weakened economy, slightly boosted by consumption in the country. Stimulus that for Trump has not sat well, because he hoped that the reduction was greater. However, with the efforts harvested, people have begun to doubt a President who promised growth rates at 3% and that, in parallel, are not being met.

Although the economic slowdown is not the express fault of any president, in the case of Trump the thing changes. The IMF has already notified the global trade situation and its impact on the world economy. A trade that, in part – regardless of the reasons the President of the United States has – is being severely punished by Donald Trump, making use of a failed negotiation strategy; as a commercial blockade is being masked in words such as negotiation.

For this reason, Trump is not the best person to rule on this because part of what the United States suffers, as well as the tortuous investment scenario, is a consequence of protectionist policies that he promoted.

In conclusion, the US economy, in particular, I do not think that it will get into a spiral that leads to the debacle, although as long as the uncertainty generated by the protectionist escalation continues to shake global trade and the world economy, we will face an economy It will not grow at the rates that its potential allows it to grow.

We are facing an end of the expansive cycle, after going through long periods of bonanza and growth. However, even if the deceleration is justified, the accentuation of the deceleration is preceded by completely failed protectionist policies; encouraging, on the other hand, a future recession in the country.



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