China is likely to bear a bigger brunt than the United States in the ongoing trade war, which started more than a year ago between two of the world’s largest economies, IMF Chief Economist Gita Gopinath said.
China is likely to bear a bigger brunt than the United States in the ongoing trade war, which started more than a year ago between two of the world’s largest economies, IMF Chief Economist Gita Gopinath said. Both the countries have imposed hefty tariffs on imports of products from the rival nation. “In terms of the impact of US versus China, the bigger impact is on China in our estimates at this point. That just comes from the fact that the US is a much more closed economy, relies much more on domestic demand while China relies a lot more on external trade,” Gita Gopinath told Bloomberg TV in an interview this week.
However, the escalating trade tensions will also cast a long shadow on global growth and can cause a slowdown in world economy. “If these tensions continue, and global growth were to say slow, even at a faster pace than we think, then that could change the financial market sentiment, that could change business confidence and that can slowdown the global economy,” Gopinath added. This is not the first time that the International Monetary Fund has predicted a bigger causality in China because of the trade tensions with the United States. Earlier in October 2018, the IMF had said that China will suffer more in case there is further escalation in tension even when this would take a major toll on the economies of both the countries.
Several companies have already started scaling their business down in China as trade war bites into profitability. Some Asian companies are also moving back to their homeland and exiting China as they look to avoid hefty US tariffs. These companies are from capital machinery and electronics sectors in Japan and Taiwan, CNBC reported this week. Meanwhile, US President Donald Trump recently said that “Chinese manufacturing would crumble if the country did not agree to the United States’ trade terms”.