Page 10 - July-August 2018 GSE Report Flip Book

TRUMP ADMINISTRATION
JJUALN. U- ARUYG. 22001188
“It’s 60% chance that we end up with a still free, but fairer, trade,” said economist Mohamed El- Erian. “There’s a 25% that this slips into a global trade war. But there’s 15% chance of what I call the ‘Reagan moment’ for trade. That would transform the landscape of trade.
“From day one, the question wasn’t whether the U.S. could win a trade war—of course it can. It’s
a how much damage would we incur in the process of winning. I’ve said from day one, it’s just a matter of time until other countries realize that their best approach is to collaborate with the U.S. and fix the things that are broken. I think we are better off for two reasons—not only because we’re big, but we’re less reliant on trade in relative terms. We get hurt less...
“...The key issue here is a bigger one, which is divergence [in global growth]. We are seeing divergent growth paths very difference from three to six months ago, when everyone fell in love with the syncronized pick up in global growth. No. It’s about divergent growth paths. It’s about a very uncertain outlook not just for China, but also for Europe and how the U.S. will navigate this. ... That’s why you’re seeing a lot more divergence in asset values.”
(CNBC’s Squawk Box, Mohamed El-Erian, 08/27/18) In a Project Syndicate, El-Erian wrote:
The latest round of tit-for-tat tariffs by the United States and China has intensified the ongoing global debate about whether the world is facing a mere trade skirmish or heading rapidly toward a full-blown trade war. But what is really at stake may be even more fundamental. Either accidentally or by design, US President Donald Trump’s administration may have paved the way for a “Reagan moment” for the international trade regime.
... Many existing trade agreements would benefit from modernization. And most economists agree that the US has genuine trade grievances against China, including intellectual property theft, asymmetrical technology transfers, and non-tariff barriers, such as the requirement that foreign companies enter joint-venture agreements with domestic firms to access the Chinese market.
But most economists also agree that competitive tariffs are a risky way to address these grievances. Because tariffs transmit stagflationary pressures (that is, they encourage simultaneous economic contraction and inflation), they risk undermining a global recovery that is already facing challenges. And they complicate long-overdue monetary-policy
© 2018 by Canfield Press, LLC. All rights reserved. www.canfieldpress.com 11