The US-China
trade war poses the biggest current threat to the global economy,
according to new research from the Economist Intelligence Unit.
The EIU put together a list of the top 10 risks the global economy is
facing in 2019, and researchers said “the combination... is more wide-ranging
and complex than at any point since the Great Recession”.
Topping the list is the chance that the trade conflict between the US
and China could “morph into a full-blown global trade war”, and could also
become a “technological arms race”.
Markets were boosted on Monday with news that the threat of a US-China
trade war might by avoided, after Donald Trump
agreed to extend
a truce over $200bn (£153bn) worth of tariffs on Chinese goods over the
weekend.
However, the EIU’s researcher’s noted that while this decision “will
avoid an escalation in tensions for now, a full-blown trade war between
the US and China remains a significant risk to the global economy, owing mainly
to the fact such a deal will lack the necessary enforcement measures to ensure
Chinese commitment to the structural reforms demanded by US negotiators”.
The second biggest risk identified by the EIU is the potential for the
US’s corporate debt burden to turn a downturn into a recession, which would
“greatly exacerbate a global slowdown”.
At number three is the threat of China suffering a “disorderly and
prolonged economic slowdown”. “Given the growing dependence of Western
manufacturers and retailers on demand in China and other emerging markets, a
disorderly slump in Chinese growth would have a severe global impact - far more
than would have been the case in earlier decades,” the report says.
A no-deal Brexit comes in at number seven, tied with an
Italian banking crisis.
If the UK leaves the EU without an agreement in place, the EIU has
forecast a “sharp depreciation in the value of the pound and a much sharper
economic slowdown in the UK than we currently forecast”. The impact on UK and
EU trade and investment is likely to “prove sizeable enough to dent global
economic growth”.
“In light of
rising geopolitical uncertainty, broadening economic headwinds and
technological shifts in the security landscape, the risks facing the global
economy are as wide-ranging and complex as they have been since the Great
Recession,” said Nicholas Fitzroy, the EIU’s risk briefing director.
“Combining
all three of these trends, a potential escalation in the US-China trade war is
the primary threat to global growth, with the possibility that a number of
other countries could be sucked into the conflict.”
Source: Independent