See More on Facebook

Economics

Trade war to intensify, make world poorer

Paul Krugman argues that the ongoing trade wars could intensify and cut world trade by two-thirds.


Written by

Updated: June 28, 2018

An intensifying global trade war would increase tariffs by up to 40 per cent and reduce trade by two-thirds around the globe, resulting in the whole world becoming poorer, a Nobel Laureate economist said Wednesday at a forum on peace and security.

Paul Krugman, a distinguished professor of the City University of New York, said South Korea’s export-driven economy is vulnerable to a US-led trade war, but its strong economic ties with other Asian countries in the region could mitigate the impact.

Paul Krugman speaks at the 13th Jeju Forum in South Korea on Wednesday.

“Big economies are on average less vulnerable. To some extent, regional trading deals may push some of the smaller economies,” he said during a special lecture at the 13th Jeju Forum held on the southern island of Jeju on Wednesday, citing South Korea as an example. “So one can imagine some kind of Asian agreement that would limit the damage.”

Globally, the trade war would eventually lead to a collapse of the global economic order and open trade in the next 10 years, which will make the world “significantly” poorer by 2 or 3 percentage points than today.

“There is a real risk, a very serious risk of trade war, something that would substantially reduce the amount of global trade,” he said. “We might see the world trade falling by around two-thirds, which would bring it back to roughly where it was in the 1950s.”

The previous administrations’ failure to do “enough” to help “losers” in the globalized trade system caused anger and dismay, contributing to the breakdown of the global trade system, he added.

At the heart of the ongoing trade war is US President Donald Trump who has pledged to reduce trade deficits with countries like China. Many of Trump’s supporters are based in the industrial Midwest where jobs were lost after factories moved abroad to cut down on production costs.

The Trump administration is expected to release details of plans to restrict Chinese investment in American businesses to sharply limit China’s access to cutting-edge US technology, which is bound to provoke a forceful retaliation from Beijing.

It comes after Trump announced on June 15 that his administration will impose tariffs on $50 billion worth of Chinese goods and threats of tariffs on up to $400 billion more in the future. He also imposed tariffs on aluminum and steel imported from Canada, Mexico and Europe.

While Trump continues to tout his trade policy of levying tariffs on imports as bringing jobs and factories back to the US, there are signs of negative repercussions on American exporters, such as soybean farmers and steel-using businesses, as the US trade partners decided to retaliate.

On Monday, Harley-Davidson, a Milwaukee-based motorcycle maker, announced its decision to move some production overseas, citing retaliatory tariffs it faces in an escalating trade dispute between the US and the European Union.

A possible trade war, unlike a war, is not a situation with victories and defeats, Krugman pointed out.

“Trade war is more like an arms race, in which everybody wastes a lot of resources and ends up in the same place, except just poorer. Everybody ends up being worse off,” he said.

Krugman was on Jeju Island for the 13th Jeju Forum, titled “Re-engineering Peace for Asia, to give a lecture on a global trade war and its implications on the regional security.

The forum, which runs from Tuesday to Thursday, brought together hundreds of government officials, diplomats, scholars and experts from around the world to delve into the fast-changing diplomatic landscape following the June 12 US-North Korea summit.



Enjoyed this story? Share it.


The Korea Herald
About the Author: The Korea Herald is the nation’s largest English-language daily and the country’s sole member of the Asia News Network.

Eastern Briefings

All you need to know about Asia


Our Eastern Briefings Newsletter presents curated stories from 22 Asian newspapers from South, Southeast and Northeast Asia.

Sign up and stay updated with the latest news.



By providing us with your email address, you agree to our Privacy Policy and Terms of Service.

View Today's Newsletter Here

Economics

Bangladeshis will be richer than Indians by 2030

This according to a new report by Standard Chartered bank. Bangladeshis will be richer than Indians by 2030 as the country’s per capita income will grow nearly four times throughout the 2020s, according to Standard Chartered — in yet another endorsement of its tremendous growth momentum. The per capita income of Bangladesh will rise to $5,734.6 in 2030. India’s will edge up to $5,423.4 after growing less than three times, according to a research note from Madhur Jha, Standard Chartered India’s head of thematic research, and David Mann, the bank’s global chief economist. Last year, Bangladesh’s per capita income stood at $1,599.8 and India’s $1,913.2. The note highlights the economies around the world that are likely to grow the fastest in the 2020s. The threshold for the list is 7 percent, the approximate growth rate at which an economy can double in size every 10 years.


By Daily Star
May 17, 2019

Economics

Jobless rate hits 19-year high in Korea

Rate rises on back of youth unemployment. South Korea’s job market prolonged its downswing in April, with unemployment reaching its highest point in 19 years, government data showed Wednesday. The increasing pace of job creation also slowed further, especially in the retail and manufacturing sectors and among the economically active 30-40 age group. According to job figures released by Statistics Korea, the total number of jobless people surpassed 1.24 million as of April for the first time since the government started compiling the data in June 1999. The jobless rate stood at 4.4 percent, up 0.3 percentage point from a year earlier and marking the highest for any April since 2000, when Asia’s fourth-largest economy was reeling under the aftermaths of the Asian Financial Crisis. The jobless rate for young adults — those aged between 15 and 29 — also rose to a record-high 11


By The Korea Herald
May 16, 2019

Economics

Beijing stresses equality in trade talks with Washington

World market confidence dampened by escalation, Chinese state media says. Consultations between China and the United States are not a one-way street, and should be conducted amid a spirit of equality, State Councilor and Foreign Minister Wang Yi said on Monday in Russia. Wang said that it is pointless for one side to blame the other, or even to absolve themselves from responsibility. Wang stressed if one side is trying to place extreme pressure on the other, it will cause a legitimate counterattack. “The measures from us are not only to safeguard China’s own rights, but to protect the basic rules of the current multilateral trading mechanism,” Wang said. Wang made the remark in a joint news conference with his Russian counterpart Sergei Lavrov during his visit to the Black Sea coastal city of Sochi. Experts warned that the rising US tariffs on Ch


By China Daily
May 16, 2019

Economics

South Korea jobless rate rises to 4.4% in April

Weak job markets and uncertain macroeconomics have contributed to increased unemployment. South Korea’s jobless rate rose to 4.4 percent in April, government data showed Wednesday, in the latest sign of a weak job market amid an economic slowdown in Asia’s fourth-largest economy. The unemployment rate increased 0.3 percentage point from a year earlier, according to the data compiled by Statistics Korea. It also marked the highest level for any April since 2000, when the corresponding figure stood at 4.5 percent. The number of employed people reached 27.03 million in April, an increase of 171,000 from the same month in 2018.


By The Korea Herald
May 15, 2019

Economics

Beijing vows retaliation on US trade

Ministry expresses ‘deep regrets’ in wake of added tariffs on Chinese goods. The Ministry of Commerce expressed “deep regrets” on Friday at the United States’ move to impose additional tariffs on Chinese imports and vowed to take necessary countermeasures. The comments came shortly after the US increased the rate of additional duties on $200 billion worth of Chinese imports from 10 percent to 25 percent, a move that economists said amounts to “typical trade bullying” that will backfire to hurt its own interests. The commerce ministry said in a statement that the 11th round of China-US high-level economic and trade consultations are underway, and China hopes the two sides can work together to resolve existing issues cooperatively. Foreign Ministry spokesman Geng Shuang said at a daily news briefing that a healthy and stable Sino-US relationship serves the


By China Daily
May 13, 2019

Economics

Pakistan reaches agreement with IMF

The country will receive $6 billion over 3 years. The technical teams of the government and the International Monetary Fund (IMF) have reached an agreement on a bailout package for Pakistan, Adviser to Prime Minister on Finance, Revenue and Economic Affairs Dr Abdul Hafeez Shaikh announced on Sunday. “After months of discussions and negotiations, a staff-level agreement has been reached between Pakistan and the IMF,” he said while speaking on state-run PTV News. Dr Shaikh revealed that Pakistan would receive $6 billion worth of assistance under the IMF programme over a period of three years. He said the staff-level agreement, which must still be approved by the IMF board of directors in Washington, would show that


By Dawn
May 13, 2019