The Warning Lights: Full-Blown Trade War Would Cost Jobs, Growth And Stability

According to Roberto Azevedo, the director-general of the World Trade Organization (WTO) the full-blown trade war would have serious effects on global economic growth and there would be no winners of such a scenario. peaking at a Berlin industry event against the backdrop of growing trade tensions between China and the United States, Azevedo said: “The warning lights are flashing. A continued escalation of tensions would pose an increased threat to stability, to jobs and to the kind of growth that we are seeing today.” A full-blown global trade war with a breakdown in international trade cooperation would reduce global trade growth by around 70 percent and GDP growth by 1.9 percent, Azevedo said.

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Translation: You can't made your own trade deals, that would put us out of our jobs

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So, checkmate...

 

Image result for checkmate trade war

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The paradigm shift in trade, business is not as usual anymore.... WTO is a purpose for itself...

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(edited)

An interesting piece of news on the consequences of Trump's unilateral approach to solving global issues

It would appear America under Trump is increasingly being considered the problem rather than the solution. The plan to bypass the $ in trade is a very dangerous precedent for the US and for its position as the world's trading currency. Once countries start finding they can avoid using the $ there are severe consequences for the US.

https://www.bbc.com/news/world-middle-east-45634448

Quote

"The remaining members in the Iranian nuclear deal say they will set up a new payment system to maintain business with Iran and bypass US sanctions.The system would facilitate oil companies and businesses to continue trading, without relying on the US-led global market and dollar.Exactly how the system would work is still being determined........

EU foreign policy chief Federica Mogherini announced the plan after talks at the UN with the remaining members of the accord - Britain, China, France, Germany, Russia.A statement said they were determined to "protect the freedom of their economic operators to pursue legitimate business with Iran"."

End

 

Edited by jaycee
formatting issues

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3 hours ago, jaycee said:

An interesting piece of news on the consequences of Trump's unilateral approach to solving global issues

President Trump is not trying to solve global issues.  He is trying to solve United States issues.

Nothing has changed. Corporations will still decide to either conduct business with Iran or with the U.S.  Their choice, always has been, and will remain so. 

Nothing to see here folks, move along

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4 minutes ago, Mike Marcellus said:

President Trump is not trying to solve global issues.  He is trying to solve United States issues.

The Iranian nuclear deal was agreed with many countries signature therefore it is a global problem. For Trump to step in reset the clock and then state what his demands are is clearly unilaterally trying to solve a global problem which was being solved.

 

12 minutes ago, Mike Marcellus said:

Nothing has changed. Corporations will still decide to either conduct business with Iran or with the U.S.  Their choice, always has been, and will remain so. 

Previously a company could do business with the US and Iran since Trump's intervention you can only do one or the other why is that not a change?

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5 hours ago, rainman said:

A full-blown global trade war with a breakdown in international trade cooperation would reduce global trade growth by around 70 percent and GDP growth by 1.9 percent, Azevedo said.

Yet the USA under Mr. Trump is not heading the world into a "global trade war."   The disputes are limited to certain items from the EU and Canada, a vast range of items from China, and global steel and aluminum being previously imported into the USA, which would thus include Korea, Turkey, India, and of course Russia  (Russia also having specific sanctions due to their elections meddling and the invasion of Ukraine).   That is not a "global trade war."  Nobody is advocating "trade war" against Peru, Chile, Argentina, Senegal, and Pakistan, to name just a few.  

Will the "trade war" drop GDP growth by 1.9%?   Probably not.   The "trade war"  (other than China and Russia) will predictably result in import substitution, where various materials and finished goods will be produced inside the USA instead of cheaper versions imported from abroad, and for some goods to be effectively excluded from the EU markets.   China already has and has long since effectively had trade barriers to exclude US products, by such tactics as demanding individual inspection of each box and crate of goods on the docks, causing fruits and vegetables to spoil and become worthless, and creating such delays for manufactured components as to force assemblers in China to substitute Chinese-produced items - which was the whole idea of the Chinese command bureaucracy. 

Cutting China out of the loop will oblige US manufacturers to re-source those goods, typically by doing the manufacturing in-house, inside the USA.  Some could go to Canadian or Mexican plants, as those trade deals mature.  Where the items are done in the USA, that implies fresh production lines inside the USA, which will boost US GDP.  It also boosts US employment levels, and thus consumer spending. 

There is no rational reason for the USA to be the product-dumping ground for production from around the world - not at this stage of development.  Some countries have structured themselves to produce for the US market; Korea comes to mind.  And that was a deliberate policy decision, intended to jump-start Korea to the path of sustainability.  Is Korea there today?  Sure is; however, the US continues to be generous, protecting Korean economic health, and does so for political reasons - except for steel, which Korea has dumped into the US market.   Yet remember that the US has the ability to massively inject economic activity into Korea at any time, simply by granting Jones Act waivers to Korean shipbuilding, which shipyards have capacity, and which also consume large amounts of steel plate.  Korea also sells steel into the USA via autos, and land and marine diesel engines of various sizes. 

Should the USA be a dumping ground for surplus steel from India?  There is no supporting reason for that, as Indian steel is effectively consolidated into one corporation.  To do so is to allow and transfer US jobs and profits to India - which does not need that support.  Let India develop its internal markets for steel, specifically including structural products and rail. In that path, India's GDP will grow as their markets develop internally.  

Keep in mind that, historically, less than 7% of US GNP came from import/export activity.  The US is a mature economic market, and is quite capable of flourishing without trade, or with minimal trade.  Most of that can be provide by only two countries - Canada and Mexico.  The US is able to do very nicely without the rest of the world, now that it can be a net oil exporter if it chooses.  There is no rational reason for the USA to be under the thumb of the WTO bureaucracy. 

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An interesting piece by Nouriel Roubini and Brunello Rosa on the consequences of Trump's policies and how they may play out..

https://www.project-syndicate.org/commentary/financial-crisis-in-2020-worse-than-2008-by-nouriel-roubini-and-brunello-rosa-2018-09

NEW YORK – As we mark the decennial of the collapse of Lehman Brothers, there are still ongoing debates about the causes and consequences of the financial crisis, and whether the lessons needed to prepare for the next one have been absorbed. But looking ahead, the more relevant question is what actually will trigger the next global recession and crisis, and when.

The current global expansion will likely continue into next year, given that the US is running large fiscal deficits, China is pursuing loose fiscal and credit policies, and Europe remains on a recovery path. But by 2020, the conditions will be ripe for a financial crisis, followed by a global recession.

There are 10 reasons for this. First, the fiscal-stimulus policies that are currently pushing the annual US growth rate above its 2% potential are unsustainable. By 2020, the stimulus will run out, and a modest fiscal drag will pull growth from 3% to slightly below 2%.

Second, because the stimulus was poorly timed, the US economy is now overheating, and inflation is rising above target. The US Federal Reserve will thus continue to raise the federal funds rate from its current 2% to at least 3.5% by 2020, and that will likely push up short- and long-term interest rates as well as the US dollar.

Meanwhile, inflation is also increasing in other key economies, and rising oil prices are contributing additional inflationary pressures. That means the other major central banks will follow the Fed toward monetary-policy normalization, which will reduce global liquidity and put upward pressure on interest rates.

Third, the Trump administration’s trade disputes with China, Europe, Mexico, Canada, and others will almost certainly escalate, leading to slower growth and higher inflation.

Fourth, other US policies will continue to add stagflationary pressure, prompting the Fed to raise interest rates higher still. The administration is restricting inward/outward investment and technology transfers, which will disrupt supply chains. It is restricting the immigrants who are needed to maintain growth as the US population ages. It is discouraging investments in the green economy. And it has no infrastructure policy to address supply-side bottlenecks.

Fifth, growth in the rest of the world will likely slow down – more so as other countries will see fit to retaliate against US protectionism.......

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On ‎9‎/‎25‎/‎2018 at 10:48 AM, jaycee said:

The Iranian nuclear deal was agreed with many countries signature therefore it is a global problem. For Trump to step in reset the clock and then state what his demands are is clearly unilaterally trying to solve a global problem which was being solved.

 

Previously a company could do business with the US and Iran since Trump's intervention you can only do one or the other why is that not a change?

That's the problem with Executive Branch Fiat, here today, gone tomorrow.   Mr. Obama knew this when he thrust the U.S. into the silly little agreement with the stroke of his pen to begin with.  Obama acted unilateral in terms of our U.S. Constitution. Treaty's require ratification by the Senate.  If Obama could have done it correctly then(of course he knew he couldn't), President Trump would not have been able to reduce it to the ash heap with the stroke of his pen now.  Elections do have consequences.

As to your second point and being able to do business with the U.S. and Iran, not completely, not all sanctions on Iran had been rolled back, remember that was the only teeth the foolish exercise had, the ability to slow roll sanctions and slap them back if deemed necessary.  Also hatched out under Obama.  The problem (also a weakness and indictment of not being a ratified treaty) is in who decides whether Iran is in or out of compliance, Casper Milquetoast Obama or the Red Headed Rooster.  Either way, we are talking about dealing with the worlds largest state sponsor of terrorism. 

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What the laws of the US are is irrelevant there were other signatories to the treaty Trump unilaterally just pulled out of the treaty what went before in America is not the point I am making. The world works on compromises and agreements not someone dictating how they want things and refusing to listen to other viewpoints.

2 hours ago, TXPower said:

As to your second point and being able to do business with the U.S. and Iran, not completely, not all sanctions on Iran had been rolled back, remember that was the only teeth the foolish exercise had, the ability to slow roll sanctions and slap them back if deemed necessary.  Also hatched out under Obama.  The problem (also a weakness and indictment of not being a ratified treaty) is in who decides whether Iran is in or out of compliance, Casper Milquetoast Obama or the Red Headed Rooster

 The original poster said nothing had changed something has changed a load of international companies that do business in Iran and the US now cannot my point is still valid no matter how you look at it.

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2 minutes ago, jaycee said:

What the laws of the US are is irrelevant there were other signatories to the treaty Trump unilaterally just pulled out of the treaty what went before in America is not the point I am making. The world works on compromises and agreements not someone dictating how they want things and refusing to listen to other viewpoints.

 The original poster said nothing had changed something has changed a load of international companies that do business in Iran and the US now cannot my point is still valid no matter how you look at it.

What our laws are is completely relevant to your point.  The whole thing lacked a solid legal foundation.  Don't build on shaky ground.

"The world works on compromises and agreements not someone dictating how they want things and refusing to listen to other viewpoints." 

^Good words for Iran as well.

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2 hours ago, TXPower said:

What our laws are is completely relevant to your point.  The whole thing lacked a solid legal foundation.  Don't build on shaky ground.

An agreement was made whatever way you cut it now Trump wants to change it those are the facts and he is doing it without the agreement of any other signatories therefore it is unilateral. The fact it was not fully legal in the US does not change those basic facts that I stated.

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20 hours ago, jaycee said:

An agreement was made

True, it was an agreement, and pulling out is not good, but staying in was worse. 

We made a deal with a regime determined to kill it's neighbors. And us too, once they could figure out a way to do it.  They will not live and let live.  It's a crowded world, I'm counting on my government to protect me and my children.  And frankly, I feel better.  Obama, Kerry, and anyone else who backed this agreement are either fools or liars.

I see a difference between the Iranian population and the people in charge in Iran.  It's the regime that must be starved out of power.  JCPOA just gave them a life line.  

20 hours ago, jaycee said:
20 hours ago, jaycee said:

 

not fully legal

That's why it was sooo easy to pull the U.S. out.  Anything ratified by congress would not have been so easily achieved.  

 So like TXPower said, if you want it to last ....

22 hours ago, TXPower said:

Don't build on shaky ground.

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1 hour ago, Mike Marcellus said:
21 hours ago, jaycee said:

 

True, it was an agreement, and pulling out is not good, but staying in was worse. 

 

We seem to be getting to common ground or at least agreeing on some points that an agreement did exist

 

1 hour ago, Mike Marcellus said:

That’s why it was sooo easy to pull the U.S. out.  Anything ratified by congress would not have been so easily achieved

All agreements are easy to pull out of if you don’t care about the consequences. Trump is pulling out of many and the consequences are in the post but this one’s downsides have become obvious straight away. 2 of America’s strongest allies are siding with its 2 chief rivals in working together to defeat its foreign policy. That is massive and far more of an immediate threat than Iran ever was. Iran would have been solved in time just like Trump has now realised will happen with N Korea. His belief in his ability to solve any problem with his very limited talents is going to leave America friendless in the world.

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1 hour ago, Mike Marcellus said:
21 hours ago, jaycee said:

 

True, it was an agreement, and pulling out is not good, but staying in was worse. 

 

We seem to be getting to common ground or at least agreeing on some points that an agreement did exist

 

1 hour ago, Mike Marcellus said:

That’s why it was sooo easy to pull the U.S. out.  Anything ratified by congress would not have been so easily achieved

All agreements are easy to pull out of if you don’t care about the consequences. Trump is pulling out of many and the consequences are in the post but this one’s downsides have become obvious straight away. 2 of America’s strongest allies are siding with its 2 chief rivals in working together to defeat its foreign policy. That is massive and far more of an immediate threat than Iran ever was. Iran would have been solved in time just like Trump has now realised will happen with N Korea. His belief in his ability to solve any problem with his very limited talents is going to leave America friendless in the world.

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Here is an interesting insight into what the folks in Washington know about China's world dominance policies:

White House National Trade Council and Office of Trade and Manufacturing Policy Director Peter Navarro spoke about the U.S.-China trade relationship. He released a report from the Office of Trade and Manufacturing Policy outlining why the U.S. must be strong on trade. June 28th, 2018.

Peter Navarro - How Trump Will Win Against China on Trade

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