Business

Fallout from Trump’s trade war now felt all over the world

But US is least exposed of world's 20 biggest economies to drop in exports

WASHINGTON: The collateral damage of the US' trade wars is being felt from the fjords of Iceland to the auto factories of Japan.

Central bank governors and finance ministers traded grim tales of suffering economies at the International Monetary Fund (IMF) and World Bank fall meetings in Washington this week.

Some also noted how far US policy had shifted from the 1940s, when Washington co-founded the IMF.

At that time, "the world economy had been hammered for over a decade by high tariff barriers, depression and war", prompting then-US Treasury Secretary Henry Morgenthau to champion a global economic system, World Bank President David Malpass told attendees at a session this week.

As the IMF's gathering of 189 member-nations drew to a close, IMF managing director Kristalina Georgieva said the unintended negative impacts of the trade wars were becoming clear.

She said: "Everybody loses."

The US, the world's largest importer, started a bitter tariff war with China, the world's largest exporter, 15 months ago. US President Donald Trump is also in the midst of renegotiating, and sometimes upending, trade relationships with many of Washington's top trading partners.

This pain is not being shared equally.

The US remains the least exposed of the world's 20 largest economies to a drop in exports in part because of its massive domestic consumer spending base.

The damage is being particularly felt in European countries which "rely on exports and are open to trade", the European Union's Economic and Financial Affairs Commissioner Pierre Moscovici said.

More than 40 per cent of Germany's GDP was derived from exports last year, the most of any major global economy. Uncertainty in the business community is widespread, German Finance Minister Olaf Scholz told reporters.

On Friday, Japan's Cabinet Office, which helps coordinate government policy, downgraded its assessment of factory output this month.

But the US has not been immune.

American farmers have been particularly hurt by Chinese tariffs on US agricultural products, prompting the Trump administration to give billions in aid to the farm belt.

Washington's imposition of steel and aluminium tariffs and uncertainty about passage of a new North American free trade deal - the United States-Mexico-Canada Agreement - have stalled development.

Other emerging markets are also coming under pressure.

"Ukrainian exporters faced worsened conditions in global commodity markets," which drove down steel prices, said Ms Kateryna Rozhkova, the deputy governor of the country's central bank. - REUTERS

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