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Tariffs would increase import prices and business costs and reduce real wages
25. July 2018 at 17:29 TASR
LONDON, NEW YORK. Trade disputes, which could lead to new global trade flows of $ 2 trillion, would reduce the global economy by 0.4% in 2019, according to Fitch Ratings.
Fitch predicts that such a scenario the global economy would only increase by 2.8% in 2019.
The Agency's baseline scenario was to increase by 3, 2% in June
Customs measures
the other customs measures contemplated by the US administration and the retaliation rights on US products imposed by the US The European Union (EU), China, Canada and Mexico would mean a significant escalation of trade disputes.
Fitch assumes that US trading partners would respond symmetrically to the NAFTA reform negotiations, a free trade agreement between Canada, the United States and Mexico
Fitch, during simulation, provided additional duties on Chinese imports $ 400 billion This would mean that they would pay up to 90% of Chinese exports to the United States.
What would happen
Customs would first increase the prices and costs of imports and reduce real wages. They would also have a negative impact on business confidence and stock prices. They would also reduce business investment and reduce consumption.
In the long run, rights would also be reflected in productivity, as local firms would be less exposed to international competition, which would make them less likely to try to increase their efficiency. Last but not least, they would limit exports
The escalation of the trade war would have the largest impact on the United States, Canada, and Mexico. GDP growth in the United States would be 0.8% in 2019 and 1% lower than that of Fitch in 2020.
The negative impact on China would be 0.3% over the two years. next years, Canada 0.8% and 1% respectively, and Mexico 1.7% and 1.5%
This would be significantly less affected by the EU, its growth would be slower by only 0, 1% in 2019, in 2020, it would be even 0.1% higher
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