During a dark era in 2018, at the end of a decade of economic expansion, it was the United States that helped propel the world in the right direction, as more money from tax cuts and government spending poured into domestic and global markets.
But if it was U. S. policy that drove global growth back then, it is U. S. policy that now threatens to sink the world, as the country’s difficult reaction to the coronavirus pandemic emerges as the main threat to any sustainable global recovery.
Officials from Mexico to Japan are already nervous. Exports have taken a hit in Germany, and Canada is cautiously heading south, knowing that any further blows to U. S. expansion will undoubtedly have repercussions.
“Challenging months and years lie ahead globally and there is specific fear that the number of COVID-19 cases will continue to rise,” the International Monetary Fund said in a report on the U. S. economy, citing “social unrest” due to the Covid-19 emergency. 19 cases. Poverty as one of the dangers to economic growth.
“The looming threat is that a giant component of the U. S. population will have to face a significant deterioration in their living standards and significant economic hardship for several years. This, in turn, could further weaken demand and exacerbate impediments to long-term growth. “.
It was a clinical description of a series of grim events: After the U. S. government committed about $3 trillion to the economy through a series of restrictions on activity imposed to curb the virus in April and May, the disease has spread in the United States to record levels. as well as those systems that are expiring.
More than 3. 6 million people have been infected and 140,000 have died. The daily increase in cases has tripled to more than 70,000 since mid-May, and the seven-day rolling average of deaths, after falling from April to July, has risen.
Meanwhile, the country has been riven by issues such as mask-wearing, which in other parts of the world have been followed smoothly out of undeniable courtesy. While some key states such as Texas and California are reimposing restrictions, analysts have already noted an imaginable plateau in the U. S. recovery, where the country still has 13. 3 million fewer jobs than in February.
A GLOBAL DISAPPOINTMENT
For the major economic powers, this represents an added weight to their own struggles against the virus and its economic consequences.
The U. S. economy accounts for about a quarter of the world’s gross domestic product. While much of this is similar to facilities and much of the direct effect of the virus is similar to sectors such as restaurants, which have weak links to the global economy. , the links are still there. A missed task causes a drop in customer spending and a reduction in imports; Weak business situations lead to a reduction in investment in appliances or materials that are produced elsewhere.
So far this year, U. S. imports may have declined by more than 13%, or about $176 billion.
In Germany, whose measures to combat the pandemic are among the most effective, exports to the United States plummeted by 36% year-on-year in May. Analysts see little prospect of improvement, with U. S. auto sales falling year-to-date through June. about 24% compared to the previous year.
“It’s disappointing,” Gabriel Felbermayr, president of the Kiel Institute for the World Economy, said in a recent interview with Deutschlandfunk radio. According to him, an increase in infections in the United States cannot be expected.
In Japan, the speed of recovery turns out to be related to the good fortune of the United States in containing the virus.
“Japan’s recovery will be delayed if the spread of the coronavirus in the United States is not stopped and exports to the United States from various Asian countries do not increase,” said Hideo Kumano, a former Bank of Japan official who is now the bank. of the executive leader of Japan. Economist at the Dai-ichi Life Research Institute.
PESSIMISM ON BOTH BORDERS
The IMF forecasts that U. S. GDP will fall by 6. 6% this year, in line with the forecasts of many analysts.
The Bank of Canada is more pessimistic, forecasting an 8. 1% drop in U. S. GDP over the course of the year. This amount has already been reduced once as the situation has deteriorated.
A further drop would directly affect Canada, as three-quarters of its exports would pass through the U. S. border.
“We have revised down our forecasts for the United States (. . . ) I want to underscore that there is a lot of uncertainty, and the main source of uncertainty is the evolution of the coronavirus itself,” Bank of Canada Governor Tiff Macklem said.
At the southern border, Mexico is also seeing a record number of new cases, but President Andres Manuel Lopez Obrador has at times deflected complaints about his government’s efforts by pointing to U. S. figures.
Lopez Obrador embarked on a dangerous layover with President Donald Trump in early July, describing his visit to Washington as an economic necessity as Mexico tries to revive an economy that could shrink by 10% or more this year, according to forecasts.
The Mexican president hopes that the new U. S. -Mexico-Canada industrial agreement (CUSMA), which took effect on July 1, will boost business and investment, but pessimism about the outlook is growing.
“The fact that Americans are wasting their jobs or their source of income represents a downward burden . . . and this will have consequences for the ability to consume globally,” said Elizabeth Crofoot, senior economist at the Conference Board, which documented a record decline in global customer confidence according to a recent survey.
“We take one step and two steps back. “
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