Bloomberg News said that two of the biggest obstacles restricting the global economy were removed before the exit from 2019.
After more than a year of trade tensions and political risks that negatively affected business confidence, prospects for global growth for 2020 improved after the United States and China reached a preliminary trade agreement, and after ditching pessimistic expectations about Brexit to some degree.
Ben Emmons, Managing Director of Global Economy Strategy
The economic agency “Bloomberg” estimated last June that the cost of the trade war between the United States and China could reach $ 1.2 trillion by 2021, with the impact spreading across the Asian supply chain.
This estimate was based on 25% of tariffs on all trade between the United States and China, and a 10% drop in stock markets.
The OECD Economy Scale shows signs of stabilizing momentum in the United States and Germany
However, the first stage of the trade deal leaves some complex problems unresolved, paving the way for new clashes with Trump’s re-nomination, for re-election in November.
This comes at a time when US complaints about the huge support network that ranges from cheap electricity to low-cost loans that China has used to build its industrial strength have yet to be addressed.
The US President confirmed that talks on the second-stage deal of the trade agreement would begin immediately.
Tom Orlik, chief economist at the Bloomberg Economics unit, said that the trade deal that restores customs duties to May 2019 levels for the United States, which means 25% of $ 50 billion in Chinese imports and 10% of another $ 200 billion, and reduces uncertainty To boost global GDP for 2020 by 0.6%.
The risks receded after the US-China agreement and the pessimistic expectations of the British exit were eliminated
He added that the collapse of the talks and the increase of tariffs are still more likely, given how the previous agreements collapsed … which will lead to a decrease in world production by 0.1%.
As for Britain’s exit from the European Union, the landslide victory of Prime Minister Boris Johnson’s Conservative Party means that Britain will leave the European Union on January 31.
Bloomberg said the result is a pick-up in growth, meaning that policy should be more active compared to 2019.
Meanwhile, Johnson must now negotiate a new trade deal with the European Union by the end of next year, which means that a new uncertainty may arise.
“Britain’s exit from the European Union may continue to affect economic activity, because the difficult task of building new business relations in the UK is just beginning,” said Simon Wells, chief European economist at HSBC.
These developments come amid broader signs that demand in most parts of the world is stabilizing with the start of major manufacturing procedures.
The International Monetary Fund has indicated that the upside risks will fade if the main trade tensions are resolved.
The US agency noted that policymakers have become more optimistic this week.
European Central Bank President Christine Lagarde said the economic slowdown in the euro area is showing signs of decline.
Federal Reserve Chairman Jerome Powell said that the prognosis for US growth remains favorable.
The Chinese government has said it will improve the effectiveness of fiscal policy in 2020, while Japan plans to introduce new fiscal stimulus.
And economists at Morgan Stanley expected that the global economy will regain some momentum in 2020 with growth improving from 2.9% in the fourth quarter of this year to 3.4% by the end of 2020, with this increase in the rest of the world. at New York-based Midley Global Consulting, said that the China-US trade tensions and election results in the UK have eradicated some major risks from markets and companies.
He added, “Business confidence should witness a big boost, after global investments have resumed their recovery, and after rebuilding stocks and increasing the volume of global trade.”
Like the financial markets, most economists took into account some sort of preliminary trade agreements between the largest economies in the world, when the global economy is expected to stabilize until 2020 after a recession earlier this year.
But as a minimum, the agreement between US President Donald Trump and his Chinese counterpart Xi Jinping means that some of the most damaging scenarios that have been contemplated just a few months ago now appear less likely.