Trade Wars – The Destroyers of Global Growth

What do we think of the current situation of the trade war? – is the question that leads to everyone’s thoughts on the US-China dispute, which is partially correct. The biggest of all current trade wars seems to be between the US and China, but that is just one of the many disputes we have.

 

The NAFTA uncertainty had just been solved yesterday when the Canadian government agreed to the deal in the last minute before the deadline. That trade dispute settlement was between the USA-Canada-Mexico, but it was not just the US’s stock market that took the negative effect from the dispute before it eased up, Asian markets also took some of this toxication, too.

 

The Brexit and EU deal also has not reached a conclusion, and it does not seem to be so in these upcoming days. All trade conditions must be renewed after Brexit, as they will not be in the EU anymore, and PM Theresa May is trying her best to settle these deals. May has said that talks with the EU are at an impasse, insisting that “no deal” is better than a bad deal.

The Brexit is not just a conflict between Britain and the EU, but also in Britain itself which has been divided into two groups, Brexit supporters, and anti-Brexit. Just like the English proverb saying that fighting the enemies outside is better than killing each other inside.

 

There are also the US and EU cars, steel and aluminum tariffs that have been settled, Iran’s sanction that have some countries refraining from purchasing oil with Iran, and the Russian who is yet to confirm whether to take the US or China as its ally. These can be considered trade wars, which have been causing negativity not only in their own market but also others for years.

 

Slowly but steadily, the damages spread. The hardship of living in those crisis countries would not have been recognized by the world without actually experiencing it. The starvation of Venezuelan, the drop in Turkish lira, Argentine Peso, and Indonesian Rupiah that causes the market and economy to plunge are all intensified by the trade wars.

When the import and export is jammed, losing hundreds of thousands of dollars, a nation starts to spend carefully. And when the world trade comes to a halt, the economy slows down, then the global growth also slows down as well. Our global trade cycle is like a supply chain when one stops, the others also stop.

Which leads to the International Monetary Fund (IMF) Managing Director Christine Lagarde to state that trade disputes and tariffs are starting to dim the outlook for global growth. She urged countries to resolve their differences and reform global trading rules. “In July, we projected 3.9 percent global growth for 2018 and 2019. The outlook has since become less bright, as you will see from our updated forecast next week,” Lagarde said.

 

Thailand has been doing well compared to other emerging countries. An ample amount of foreign reserves and a considerable current account surplus should safeguard Thailand from external shock. Thailand is now the second-largest economy in Southeast Asia, having more than $200 billion (6.5 trillion baht) in reserve. This amount is more than enough to support 10 months of import.

 

However, if the disputes go on and on, what would become to Thailand, not to mention the global market. Looking back 40 years in the past, we have experienced three major crisis every ten years. First, the Black Monday in 1987. Second, the Tom Yum Goong crisis (Asia crisis) in 1997-1998. Third, the Global Financial crisis in 2007-2008. Now it is 2018, and the situation does not seem so bright.

The question in the near future may not be “how good the business will be?”, but more like “how can we survive this crisis?”