PARIS — Economic growth in China and the United States could be 0.2-0.3 per cent lower on average by 2021 and 2022 if the two countries do not row back on tit-for-tat tariffs in their dispute that has dampened the global economic outlook, the OECD said on Tuesday.
U.S. President Donald Trump has raised tariffs on US$200 billion on Chinese imports to 25 per cent from 10 per cent in the long-running trade row, while Beijing said it would hit back by lifting tariffs on US$60 billion in U.S. goods.
The global economy would grow by only 3.2 per cent this year as growth in trade flows is nearly halved this year to only 2.1 per cent, the Organisation for Economic Cooperation and Development (OECD) said in its biannual Economic Outlook.
That would be the slowest pace of global economic growth since 2016 and was down marginally from the Paris-based policy forum’s last forecast in March for growth of 3.3 per cent.
The world economy should fare slightly better next year with a growth rate of 3.4 per cent, but only if the United States and China pull back from tariff hikes announced this month.
The OECD said growth in China and the United States could come in 0.2-0.3 per cent lower on average by 2021 and 2022 if the two nations did not reverse course.
Without taking the latest round of tariff increases into account, the OECD forecast the United States would outpace other big developed economies with growth of 2.8 per cent this year, up from the 2.6 per cent the organization had projected in March.
The world’s biggest economy was seen slowing to 2.3 per cent next year even if the new tariff hikes are not carried through.
China, which is not an OECD country, has been seeking to stimulate its economy but growth was still seen easing from 6.2 per cent this year to 6.0 per cent in 2020, the lowest rate in 30 years for the world’s second-biggest economy.
Global investors are closely watching to see how much more support Beijing will inject to shore up growth after China already loosened monetary policy, cut taxes and allowed local governments to issue special bonds to fund infrastructure projects.
Japan’s export-dependent economy is suffering from the drop in trade flows with growth expected at only 0.7 per cent in 2019 and 0.6 per cent in 2020, trimmed from the OECD’s March forecasts of 0.8 per cent and 0.7 per cent respectively.
The eurozone is also paying a heavy price for the global trade slowdown, with its growth seen this year at 1.2 per cent before rising to 1.4 per cent year. That was slightly better than the 1.0 per cent and 1.2 per cent expected in March as Italy’s downturn proves slightly less severe than previously expected
Meanwhile, the OECD raised Britain’s growth forecast to 1.2 per cent this year from 0.8 per cent previously, as the prospect of its exit from the European Union was pushed back. UK growth is expected to fall to 1.0 per cent, marginally better than the 0.9 per cent expected in March.
© Thomson Reuters 2019
