WASHINGTON (Reuters) – During a blue-sky moment in 2018 near the end of a decade-long economic expansion, it was the United States that helped pull the world out of tax cuts in the form of excess cash and domestic and global channels. The government spent from. Markets.
FILE PHOTO: A 3D-printed coronavirus model shown in front of the American flag in this depiction taken on March 25, 2020. REUTERS / Dado Ruvic / Illustration / File Photo
But if it was American policy that pushed the world higher, it is American policy that now threatens to pull the world away as the country’s troubled response to the coronovirus epidemic emerges as a major risk to any continued global recovery is.
Officials from Mexico to Japan are already on edge. Exports to Germany have accelerated, and Canada looks to the south knowing that any further setback to US growth will undoubtedly end.
The International Monetary Fund, citing “social unrest”, said in a review of the US economy, “globally it will be difficult in the coming months and years and it is of particular concern that the number of COVID-19 cases is still increasing is. Poverty as one of the risks of economic development.
“The further risk is that a large portion of the American population will have to cope with significant declines in living standards and significant economic hardship for many years. This, in turn, can further weaken demand and increase long-term headvices for growth. ”
It was a clinical description of a serious set of facts: a pledge of nearly $ 3 trillion to support the economy through a round of restrictions on activity imposed by the US government in April and May to curb the virus After giving, the disease continues to grow in the United States. Record levels are the same as support programs ending. More than 3.6 million people have been infected and 140,000 people have died. The daily increase in cases has increased to more than 70,000 since mid-May, and an average of 7 days of deaths have risen since the fall from April to July.
Meanwhile the country has broken down on issues such as wearing a mask that was easily adopted as a matter of common courtesy in other parts of the world. While some major states, such as Texas and California, have re-enacted the sanctions, analysts have already cited a potential plateau for the US recovery in which the country is still shaming by 13.3 million jobs.
A global performance
For other major economic powers, this is the added weight in their own struggle with viruses and economic decline.
The US economy accounts for about a quarter of world GDP. While much of it is service-related, and much of the direct impact of the virus is tied into industries such as restaurants with weak links to the global economy, connections still remain. A lost job leads to lower consumer spending and fewer imports; Due to weak business conditions there is less investment in equipment or supplies that often arise elsewhere.
US imports have been down more than 13% year-over-year since May, or about $ 176 billion.
In Germany, whose pandemic measures are considered the most effective, exports to the United States fell 36% year-over-year in May. Analysts have shown little potential for improvement, with US auto sales during June nearly 24% lower than a year earlier.
“It’s really a disappointment,” said Gabriel Felbermaier, president of the Kiel Institute for the World Economy, in a recent interview with the radio network Deutschlandfunk. The spike in American infection, he said, could not be expected.
In Japan, the pace of recovery is seen to be directly tied to US success in controlling the virus.
Hideo Kumano, a former Bank of Japan official, said, “Japan’s recovery will actually be delayed if the spread of coronavirus in the United States has not stopped and US exports from various Asian countries have not increased”. Economist at Dai-ichi Life Research Institute.
PIMIMISM on both borders
The IMF estimated that US GDP would shrink to 6.6% this year, in line with estimates by several analysts.
The Bank of Canada is more pessimistic, with US GDP projected to fall 8.1% this year. It has already been lowered due to deteriorating health conditions.
Three-quarters of the country’s exports over the US border would hit another leg-down with Canada directly with Canada.
BOC Governor Tiff Macklem said, “We took down our American trajectory … I will underline that there is a lot of uncertainty, and the principle source of uncertainty is the evolution of coronoviruses.”
On the southern border, Mexico is also posting a record daily number of new cases, but President Andrés Manuel López Obredor has at times criticized his government’s efforts by pointing to US numbers.
According to forecasts, López Obredor made a risky trip with President Donald Trump in July, acknowledging his visit to Washington as an economic necessity.
The Mexican president hopes the new United States-Mexico-Canada Agreement (USMCA) trade deal, which took effect on July 1, will boost trade and investment, but increasing pessimism about the outlook.
“To the point that people in the US are losing jobs or their incomes are declining … and this will affect their ability to consume globally,” said Elizabeth Cruyff, senior economist for the Conference Board. A recent survey showed a decline in global consumer confidence.
“We take one step forward and two steps back.”
Reporting by Howard Schneider in Washington; Additional reporting by Reinhard Baker and Christian Kramer in Berlin, Lyika Kihara in Tokyo, Steve Shire in Ottawa and Dave Graham in Mexico City; Editing by Dan Burns and Matthew Lewis