"FRANKFURT. Losses on the stock markets, unsettled companies, and container ships that are no longer being booked - the US-China trade conflict has already visibly hit the global economy. Those hoping that these are temporary phenomena are likely to be mistaken. That, at least, is the expectation of the Association of Bavarian Business (vbw), which represents numerous export-oriented corporations and medium-sized companies.
The liberal world economic order under the umbrella of the World Trade Organization (WTO) "no longer has a real future," association president Wolfram Hatz told the Frankfurter Allgemeine Zeitung.
He assumes that the global regulatory framework will be significantly more unstable in the future. Hatz warns: "Rules-based trade policy is being replaced by power politics."
Practitioners from German business are even more pessimistic than WTO experts. In mid-April, they predicted a collapse in global trade for the current year of originally forecast 2.7 percent growth to a minus of 0.2 percent. However, they expected a return to the old growth path for 2026. Not so the Bavarian economy.
It sees "the foundation of the previous liberal world economic order has collapsed," partly due to the "aggressive protectionist agenda" of US President Donald Trump, and partly because countries like China and Russia also advocated a new global regulatory structure.
But what might the new normal in global trade look like? The business association commissioned the Prognos Institute to develop three scenarios for a world in which multilateral institutions and the Western community of nations lose their central role and large emerging economies have greater influence.
In the first two scenarios, the geopolitical conflict between the US and China persists, but does not escalate. What initially sounds reassuring nevertheless has far-reaching consequences, in the authors' view. "Many countries are increasing – often erratically – their import tariffs, non-tariff trade barriers in the form of technical regulations, safety requirements, according to the study, which the trade association will present on May 7 at the Ludwig Erhard Summit in Tegernsee, which it co-organized. In the first scenario, the EU takes a neutral position, "a certain degree of foreign trade unbundling takes place," and the United States and China decline somewhat in importance as sales and procurement markets for the EU. At the same time, however, the EU succeeds in reducing trade barriers within the internal market and cooperating more closely with other countries. Free trade agreements are being concluded or deepened with countries and economic areas such as India, Mercosur, ASEAN, Japan, South Korea, Australia, and Canada. Even if these improvements are successful, it will be difficult for Germany to avoid a worse bottom line: If trade with China and the USA were to halve, this would correspond to ten percent of German foreign trade or total trade with the aforementioned potential free trade partners.
The pharmaceutical (America) and electronics (China) sectors could suffer in particular.
In the second scenario, the EU also falls into protectionism. Then, "foreign trade – and thus a crucial business foundation for many German and Bavarian companies – is likely to erode massively," the study states. The study does not provide concrete figures on how many jobs and how much economic power are at stake in this case.
In the third scenario, the US conflict with China escalates due to a Chinese attack on Taiwan, which the People's Republic has been threatening, at least indirectly, for years. In this "worst-case scenario," the EU sides with the US, and trade with China collapses as sharply as that with Russia in events of Ukraine. In figures, this means "a loss of €60 billion in German exports and almost €140 billion in German imports." At the same time, foreign investment collapses, research collaborations disappear, and—probably worst of all—supply chains are disrupted "comprehensively and for a long time," leading to sharp price increases and production losses in Germany.
The authors do not consider this collapse to be the most likely scenario. "One of the first two scenarios is likely," said association president Hatz. The EU will tend to refrain from drastic trade restrictions and instead seek compensation through the conclusion of trade agreements with other countries, which corresponds to the first, positive scenario. Hatz considers this to be correct and calls on the EU to promote foreign trade with other major to strengthen Western-oriented economies and reduce trade barriers within the EU. The "non-tariff" ones." [1]
1. Der Worst Case für den Welthandel: Die Weltwirtschaft ordnet sich neu - eine Untersuchung zeigt, wie schlimm es für Deutschland kommen könnte. Frankfurter Allgemeine Zeitung; Frankfurt. 02 May 2025: 18.
Komentarų nėra:
Rašyti komentarą