Costly Protectionism

By Isaac Cohen*

Evidence is increasing that the trade confrontation between the United States and China is contributing to a slowdown in both economies, which is hurting global economic growth. One of the first quantifications of the damage is the estimate by the International Monetary Fund that “US-China trade tensions will cumulatively reduce the level of global growth by 0.8 percent by 2020.” https://blogs.imf.org/2019/10/15/the-world-economy-synchronized-slowdown-precarious-outlook/

There is also evidence that the US economy is slowing down and the pernicious effects of the trade tensions are hurting the performance of specific sectors. The GDPNow model from the Federal Reserve Bank of Atlanta, on November 18, estimated real US economic growth of 0.4 percent for this year’s last quarter. https://www.frbatlanta.org/cqer/research/gdpnow?utm_medium=email&utm_source=mailchimp&utm_campaign=data-and-tools&utm_source=Atlanta+Fed+E-mail+Subscriptions&utm_campaign=66536369e0-weekly-digest-2019-11-24&utm_medium=email&utm_term=0_b7a27f0b85-66536369e0-216602829

Despite the lowest unemployment rate in half a century, low inflation and record setting market indexes, the protectionist measures emanating from the White House and the consequent uncertainty are hurting business investment and manufacturing.

More concentrated has been the damage caused by the trade tensions on US agriculture. Last week, the Federal Reserve Bank of Kansas revealed a fall in farm income during this year’s third quarter, from last year, in the seven rural states covered by the bank. US agricultural exports to China fell by more than half, from $20 billion in 2017 to $9 billion in 2018, while bankruptcies among farmers increased 24 percent (Washington Post 11/14/19). But beyond the economic costs, the trade tensions have a political cost. Among the seven states covered by the Federal Reserve Bank of Kansas, are several which contributed to President Donald Trump’s 2016 electoral college victory.

*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.

About Ramón Jiménez

Ramón Jiménez, Managing Editor de MetroLatinoUSA.Com (MLN). Graduado de la Escuela de Periodismo de la Universidad del Distrito de Columbia (UDC). Email: [email protected]

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