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- Fitch: U.S.-China trade war escalation could knock 0.4 pp off world GDP by 2020
Fitch: U.S.-China trade war escalation could knock 0.4 pp off world GDP by 2020
Fitch Ratings says that the imposition by the U.S. of 25% tariffs on the remaining $300 billion of imports from China would reduce world economic output by 0.4pp in 2020.
- "Global GDP growth would slow to 2.7% this year and 2.4% next year.
- China's growth rate would be reduced by 0.6pp, and US growth by 0.4pp, in 2020.
- The imposition of tariffs on all imports from China being considered by the U.S. administration would mark a significant escalation of trade tensions.
- For China and the U.S, the tariffs would initially feed through to lower export volumes and higher import prices, with the latter raising firms' costs and reducing r.eal wages.
- Business confidence and equity prices would also be dampened, further weighing on business investment and reducing consumption through a wealth effect.
- Export competitiveness in the countries subject to tariffs would decline, resulting in lower export volumes.
- Import substitution would offset some of the growth shock in the countries imposing import tariffs.
- Countries not directly involved in the trade war would also see their GDP falling below baseline, though in most cases by less than the US and China."
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