KT edit: Trade war now a currency conflict
As the 45th G7 Summit takes place in Biarritz, France, from August 24 to 26, the leaders of the member states will have to grasp this nettle and it will sting.
As two giants engage in a trade war the ripple effect will encompass the world. Beijing's threat to place new tariffs on $110 billion worth of goods from the US only escalates the confrontation. But to be fair it was pretty much on the cards after the Donald Trump administration in the US hit China with more levies on $250 billion worth of goods. The inimical nature of upping the ante is evident from the fact that the US intends to target another $300 billion worth of goods from September 1. If anyone had any doubts that things would plateau out that hope is dispelled seeing how China is following the same dateline for its impositions. Lingering hopes fell by the wayside when Trump instantly reacted to Beijing's move by placing fresh tariffs on Friday on another $300 billion worth of Chinese goods into the US and an additional 5 per cent levy.
As the 45th G7 Summit takes place in Biarritz, France, from August 24 to 26, the leaders of the member states will have to grasp this nettle and it will sting. The International Monetary Fund and the World Bank have already revised the estimated global annual growth rate to a mere 2.3 per cent, and the fear that the US-China hostility could deteriorate the conditions further is palpable. With President Trump using harsh rhetoric and accusing China of stealing billions from the US and China looking to return the insult in spades, the shift from a trade war into a currency war is dangerously close. Calling China a currency manipulator hadn't helped matters very much. Economic experts believe this trade conflict is a muscle flex by both nations to assert financial and territorial dominance. But in doing so the two behemoths could trigger a worldwide recession that would be devastating not just in terms of a slowdown but also a major loss in earning power. One can only hope the leaders gathering at the G7 Summit come up with some breakthrough because a solution is near impossible. The world stands by helplessly as its immediate fiscal future is tossed like a bean bag with little relief and even less chance of the situation improving.