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Donald Trump holds the executive order that introduces world rates.
Photo: Saul Loeb
With China and the promising Escalação de Comércação de Comércação from the US, it can take five to 10 years for the world to adjust to Donald Trump’s fares, says the former Economist of Reserve Bank Michael Redell.
Other economists have attracted parallels with the great depression and say New Zealand must be preparing now for a crisis.
US President Donald Trump threatened to increase China’s rates to 104 % if he cannot retreat from his own retaliation tariffs. Beijing, in return, promised not to bow the “blackmail” and promised “fight to the end”.
Renz told RNZ that an increasingly probable global recession would look like the 2008 global financial crisis more than recent shocks, worsened by the already inflated unemployment levels.
“We didn’t have a domestic financial crisis, the US had one – but we still took the weight of this slowdown in economic activity.
“You could easily see the world GDP – which this year was expected to have 2.5 to 3 % growth – going zero or materially negative … So something more severe than the recessions we are already in and out of the last 18 months – and this is from the starting point where the unemployment rate has increased to 5 %.”
Former Economist of Reserve Bank, Michael Reddell, says it can take five to 10 years for the world to adjust to Donald Trump’s tariffs.
Photo: Provided
Simplicity economist Shamubeel Eagb said the “opening saves” of the US and China meant “now we are in the clutches of this tariff war and trade war.”
“That’s why markets have fallen so much, because there is so much uncertainty and there is a real fear that it leads to a great slowdown in the global economy.”
He said that the New Zealanders who save retirement should be remembered that the biggest contribution of these funds was to make a regular savings and ensure that they were in a fund that fit into their circumstances.
Exporters must be strategies to slow the demand, he said. Things may seem good in the short term because of low US tariff rates compared to other countries – but it was not likely to last.
“New Zealand has a little relief in terms of only in the coming months – we can get some market share – but we should prepare for a broader kind of consequences because of this high rate that affects demand in many of these great economies.”
New Zealand’s chief economist Eric Crampton pointed out the effects on New Zealand’s greatest export – dairy – for his largest commercial partner, China.
“They are our commercial partner number one currently, if their products are substantially tariff in the United States, China gets poorer; they are less able to pay the things we sell them. Unfortunately, the United States is also poorer and also less able to buy the things we sell them.”
He said that with the rules being awakened, it was difficult to make predictions – but the chances of a US recession were probably likely.
“Very disappointing, [considering] Trump has taken office with a very strong economy … If it is aggravated by uncertainty in progress and waves of ongoing tariffs, it may be deeper than that, but I would not like to put a number. “
Economist Eric Crampton says it is difficult to make predictions – but the chances of a US recession are likely.
Photo: Provided
Reddell said the effects of New Zealand’s global recession tend to be lower commodity prices, less tourists and fewer international students; Commercial investment was particularly likely to suffer, not just internally.
“If you are a business person – really anywhere, but particularly in these great economies or Vietnam, Japan or Korea, which are caught with high tariffs – you would be saying no to any new investment plan.
“This in itself, combined with the nervousness of consumers who face higher prices and uncertainty about their jobs, means that we could have a very unpleasant deceleration.”
‘It can be very bad’
Crampton returned to the great depression, saying that some of the settings were similar.
“The initial cause of the great depression was not rates, it was a defective monetary policy – but tariffs had some effects, they made all the poorest. The sets of retaliation tariffs made people difficult to make investment decisions, and this was aggravated by the political uncertainty in progress in the United States.
“This is the worrying dynamics here, where Trump’s tariffs are breaking most of the rules that have been established for decades, if they will return or turn off again they are always in the air.”
“The parallel here is that we have the waves of tariffs … There will be a development of commercial relationship sets … composed of continuous additional political uncertainty in the United States and potentially in China going to war with Taiwan.
“It can be very bad. It would be surprising if we avoided at least a recession in the United States this year, New Zealand is in better shape than other countries, but it’s still very bad.”
He said how long it took New Zealand to recover “depends on how long it takes the US government to really feel.”
“If this regime remains fundamentally unpredictable for a long time, there will be a sharp depression in investment in the United States and consequent reductions in consumer spending and less demand for New Zealand products.”
The same effect would apply to China and other Asian countries, having “very serious consequences” for New Zealand’s exports and global trade, he said.
Fears about European tariffs in China
Reddell said the US and China that increase trade war would only get worse – but that could improve in about five to 10 years.
“The more these things develop, the more pain and general displacement and short -term cost,” he said.
China was another concern for New Zealand due to its size than just because of its status as our largest commercial partner. He said Beijing was in a harder position than when he adopted the “Big Bazooka” approach to the GFC crisis – a $ 586 billion stimuli package.
“They have more debt problems. They have more excessive investment in the last decade. Therefore, they are probably limited in what they can do.”
Although global exporters can look for other markets such as Australia and New Zealand, this may also risk scaling tariffs – for example, if Chinese exporters start sending goods to Europe instead of the US, the EU can look at tariffs in China to protect their own manufacturing industries.
But not everything was bastard and dark.
“If we move to a world where all the big blocks – China, the US and Europe – had 50 % tariffs on each other, and that was a permanent feature of their economies, we will all be poorer as a result, but economies would still grow. Societies are still innovating.
“The US had really high rates coming out of World War II, for example, and that was a very strong growth period for us and a lot of other economies.”
But until this stage was reached, “the displacement of coming from where we were – largely free trade – to much higher rates, it will be extremely painful … having to relocate production plants to different places, to rearrange the supply chains and that kind of thing, which would not be surprised, if it would not be surprised.
Economist Shamubeel Eagb wants to see the government moving from a period of austerity to increase the economy.
Photo: Provided
What New Zealand could do to prepare
Reddell said there was just from New Zealand to affect the US-china confrontation.
“We are in this kind of situation – when elephants fight, the grass is crushed,” he said.
“I think we want to be together with a lot of small, advanced democracies to favor free trade – perhaps not antagonizing Trump unnecessarily, but also not being obsequiah.”
The EAQB agreed, saying that this was the most important thing the country could do, and keep the diplomatic channels open to try to reduce US tariff effects.
“We also want to see the government moving from a period of austerity to a period of really increasing the economy, because when there is a lot of risk and uncertainty around the global economy, we cannot seek austerity – it is madness.”
Crampton said the message of the first -minister Christopher Luxon, criticizing the tariffs, was “on site”.
“It was less about trying to convince Trump that his fares is wrong – because he will never hear us about it. It was more about reaffirming commitments to the rules that have kept well for everyone for decades and trying to build this coalition of countries that remain committed to opening commercial orders.”
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