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US-China trade war is pushing the world economy closer to the edge. The longer it goes on, the harder it will be to undo the damage
- Compared to pre-2008 crisis levels, world economic growth has plummeted by half and is at risk of a long-term, hard-to-reverse stagnation. Returning to global integration and multilateral reconciliation could dramatically change the scenario
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Why you can trust SCMP
I have been following four generic scenarios on the prospects of global economic growth since the 2016 US presidential election. The first two represent variants of economic “recoupling”. In these cases, global integration prevails, despite tensions. In the next two scenarios, global integration fails, either in part and regionally, or fully and globally.
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What should worry us all is that, as US-China trade war tensions have grown, global growth prospects have slowly but surely moved from the ideal and preferable scenarios towards the worst and darkest.
In the first scenario, a return to cooperation, the US and China achieve a trade agreement. Both agree to phase out additional tariffs, renounce trade threats and establish working groups to defuse other friction areas in intellectual property rights, social and political issues, and military matters.
Global growth prospects could — in the best scenario — exceed the old baselines of the Organisation for Economic Cooperation and Development or the International Monetary Fund, at more than 4 per cent.
This was always the least likely scenario and, today, its probability is minimal. Yet, it is important to remember that around the time of the first meeting in 2017 between US President Donald Trump and Chinese President Xi Jinping, many observers saw the scenario as possible, even probable.
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