Sputnik has talked about the IMF's warning with Carl Fey, a professor of international trade with the School of Business at Aalto University.
Sputnik: What do you make of this new report by the IMF? How bad is the situation really they've said that it's going to be 0.2% less growth for the global economy, is that really something frightening?
If this happens it will not be such a big problem for the global economy, but if it becomes that this is actually a new policy of the US to try to have such significant tariffs rather than a short-term negotiating tactic, then I think we're in for some real problems.
Sputnik: How bad would that be from your point of view?
Carl Fey: Well, that would be obviously quite substantial. I think many people have focused on the impact to the US economy and the impact to the Chinese economy of this conflict. And I think the important thing to understand today is that the economies of the world are incredibly interlinked. There are global supply chains that feature in most industries.
So when you have one particular business or one particular industry affected in one country that company is very often selling its produce or products to other companies in other countries and so it really affects the entire world quite substantially. So there's a real risk I think that we'll see the effects of this greater than the 0.2% that is currently suggested even though that is, of course, quiet substantive just in itself.
Sputnik: And that was the first downgrade since the summer of 2016, so I guess it's supposed to be quite significant that it's been that long before we've seen a downgrade, but it's very interesting to note that one of the countries that is going to be most affected is the United States and going into the US midterms which are so important for Donald Trump like no other president before because it's not just a matter of keeping your policies above water and being able to pass your bills, this is a matter of maybe whether or not Trump will stay in office because of the way his presidency has developed, do you really think that this is a new policy of his to have these higher tariffs?
Sputnik: Don't you kind of feel like we should see something happening before the midterms because it seems like the US is going to be very much affected by this and consumers are going to be affected, manufacturers are going to be affected, farmers are going to be very much affected because of the tariffs that the Chinese have imposed in response to US tariffs?
Carl Fey: Surely, I'm sure that the desired outcome for Trump would be that he is able to come to some sort of agreement before the midterm elections, given where we stand at the moment I think it's unlikely there is an agreement that quickly. I think it's going to take more time than that.
Sputnik: If that doesn't happen what do you think is going to happen if the Democrats see a significant win in the midterms?
And so Trump is benefiting right now that fortunately things are going pretty well in the US and it's also important to remember that while indeed this is hurting the US economy, the tariffs that he has imposed, at the same time a lot of his base, the people that might vote for him, are people who really like to see the US standing strong to other countries on trade issues which it has not done for a long time.
Now what will happen at the midterm elections, I think it's a little bit hard to say. It looks like most people are saying that the Democrats are likely to make some gains and the question is just how many gains will we see. And, obviously, this will have an impact on things, of course. It's not Trump being re-elected but whether he has a majority to deal with in the Senate makes a big difference for how he can progress his policies and thus how he will be evaluated for his first four years in office. So this is really a critical election for the US and for the world, which is why I think we're seeing so much attention and so much money being spent on it in the US.
The views expressed in this article are solely those of Carl Fey and do not necessarily reflect the official position of Sputnik.