Report: US-China relations to fragment global trade

The global trade landscape faces turbulent times ahead as the specter of a US-China trade war looms large. Allianz Trade Credit Intelligence Director, Luke Morawitz, recently shared insights from a report detailing the potential impacts of escalating trade tensions between the two economic superpowers. In a recent interview with CNBC Africa, Morawitz highlighted the key observations and consequences of President Donald Trump's trade policies. Morawitz emphasized that the resurgence of trade tariffs under the Trump administration could have significant ramifications for global trade growth. The Allianz report outlined two scenarios: a contained scenario, which would result in a 0.6% decline in global trade growth, and a full-blown scenario, which could lead to a 2.4% decrease. Central to these scenarios were the tariffs the US might impose on imports, with China likely to bear the brunt of the impact. The potential increase in tariffs on Chinese goods, ranging from 25% to 60% under the two scenarios, could have cascading effects on inflation globally. Morawitz underscored the critical role of inflation management amidst the backdrop of escalating trade tensions, cautioning that unchecked tariffs could fuel further inflationary pressures. While the full-blown scenario presented in the report paints a grim picture for global trade, Morawitz expressed skepticism regarding its likelihood. Citing the robust performance of the US economy and measures taken by the Federal Reserve to contain inflation, he suggested that a full-blown scenario was improbable. However, he warned that such an outcome could still result in a significant loss of GDP growth for the US. The interview delved into the potential retaliatory measures that China could take in response to US tariffs. Morawitz highlighted China's economic ascendance and its expanding market influence, positioning it strongly to weather trade disputes. Meanwhile, countries in the global South, including South Africa, could face substantial economic losses under the worst-case scenario, hinting at potential implications for trade relationships and agreements. In the context of South Africa, the report estimated trade losses of up to $3.3 billion in a full-blown scenario, highlighting the shift in trade partnerships from traditional allies to China. The uncertain future of trade agreements, such as AGOA, added another layer of complexity to the potential economic fallout. The conversation concluded with a reflection on the puzzling nature of Trump's trade policies. Morawitz acknowledged the perplexity surrounding the imposition of tariffs by the US and the broader global confusion over the rationale behind such actions. The interview underscored the challenges and uncertainties facing the global economy amidst rising trade tensions, underscoring the need for strategic diplomacy and economic foresight in navigating these turbulent waters.