Elongated Trade Wars’ Impact on Global Economy
Singapore, a heavily export dependent country had issued a stern warning for the world, that the consequences of prolonged trade wars would be devastating.
According to Chang Chun Sing, Trade and Industry Minister said, although South-East Asia managed to obtain certain benefits from the rift between US and China, the effect of prolonged conflict should concern all parties involved the situation of the global economy. He went on to add in an interview done by Bloomberg, that in the medium term, certain nations would reap the benefits of this but other would end up on the losing side.
Chang Chun Sing added that the impact made by it would devastating on the financial markets and would result in halting the whole economic system, which in turn would affect each and every one of us in an adverse manner. Although still in its early phases, the worst-case scenario is yet to be recognized.
The effect of such would be severe to a small yet open economy such as Singapore, where over 173% of the GDP is made up from exports in the past year. The country is caught in the crossfire between the no. 1 and no.4 trading partners with regards to tariffs resulting in possible upend global supply chains.
In the phase of a possible international economic downturn, the event could be made much worse with the trade-related plunge in sentiment, according Mr. Chan. If by chance this falls directly on what is expected by the people in regards to global downturn owing to technicalities and would result in a turbulent situation in the future.
Troubling signs are present. Surveys conducted in China to Indonesia had showcased a reduction in the manufacturing sentiment in the middle of 2018, resulting in a lesser activity derived from the rivalry between US and China. Singapore’s Purchasing Managers’ Index dropped to its lowest for the past two years.
According to Mr. Chan, the fundamentals of Singapore’s economy are still relevant, and minor fluctuations are to be expected. The main issue in the fluctuations occurring on a long-term basis. As per now, there is a solid economic growth, with a possible expansion of 3.2% this year, as opposed to the 3.6% in the previous.
These warnings issued by Singapore are pouring in just prior to the World Bank and International Monetary Fund’s annual meeting which is to be held in the coming week in Bali. JPMorgan Chase & Co is expecting a full-blown trade war, with US sanctions on Chinese import items. Bank of America Merrill Lynch expects a slowing of the Chinese market and a wave of reduction to spread over to other Asian markets.
To get over the turbulent conditions, Singapore has two major tasks to deal with, the first being maintain the openness of the global trading system, and working from within to strengthen the economy. As per Mr. Chan, Singapore should work with similar nations to maintain the global trading system, maintain free trade agreements in the form of either bilateral or multilateral agreements, which would ensure its openness.
Mr. Chan clarified that a breakdown in the system would push back the economy back over a century to the time period of the great depression where people believed in closed borders and isolation.
According to him: domestically, Singapore should maintain its efforts to production factors should be made more effective, which is inclusive of retaining the labor force for upcoming markets and bringing in new international workers to enhance the productivity of the labor market.