China always got that thing for trade; they just like it and very much excelling doing it.
Industry Opinions

US-China Trade War: How COVID 19 is resetting the Buttons

China always got that thing for trade; they just like it and very much excelling doing it.

That unparalleled love deeply buried in history when their founding fathers invented the first-ever banking service to enhance trade and make it easy between regions.

The Feiquan  “a two-part document allowing merchants to deposit profits in a regional office, and reclaim their cashback in the capital. It was during the rule of the Tang dynasty from  618 to 907, this empire not only invented the Feiquan but also reopened the silk road connecting China to Europe and the western world, reaching middle east and beyond while trading everything, building new trade networks and making their empire stronger.

The folks have actually paved the way for the modern-day strategic Silk Road China is trying to expand.

Same as the FEIQUAN, COVID-19 birthplace was China, a Global pandemic as declared by the World Health Organization (WHO) leading to the hindrance of trade and the closure of international borders.

The WORLD is being severely affected by the outbreak of the novel coronavirus (COVID-19). Many countries have closed ports, airports, imposed travel restrictions and shut down factories, negatively disrupting global trade and international supply chains, the global manufacturing and services sectors along with the leading financial markets in the world plunged to record lows in February and March, the collateral damage seems unavoidable.

The pandemic is probably the worst health crisis in our life as it already had a damaging economic and business impact worldwide, affecting nearly all sectors from tourism to the airline and technology Industries, closing schools, universities, factories, forcing large corporations to seek safe alternative havens to operate from.

Stock markets across the globe also took a hit as massive stocks sell-off triggered by concerns over the impact of the virus incremental tally.

S&P 500 Index had its worst week since the 2008 global financial crisis.

The Covid-19 has literally wreaked havoc on communities and economies on an unprecedented global scale. If we put it on the lips of UN Secretary-General Antonio “The world is facing an unprecedented test”.

A test that will not only measure the supposed readiness of leading superpowers to “an invisible enemy ” as per President Trump favourite description but will have its significant geopolitical aftermath and may reshape international trade spectrum.

There in China where it began, a pre-pandemic GDP growth forecast was a moderate 5.9%, now the expectations slipped to 5.4% and due to the degree of intertwines between china’s GDP and the global GDP where China is currently conquering a solid 17% share.

Economists are linking the dots and they could predict a worst-case scenario of the global GDP to dip to below 2%.

China is suffering a disastrous impact out of this as the automobile sales sank a record 80%, CNN reported that car plants across China have been ordered to remain closed following the Lunar New Year holiday, preventing global automakers Volkswagen (VLKAF), Toyota (TM), Daimler (DDAIF), General Motors (GM), Renault (RNLSY), Honda (HMC) and Hyundai (HYMTF) from resuming operations in the world’s largest car market.

In turn, Chinese exports fell 17.2% in January and February. China’s overall economy is slowing down and its huge manufacturing base is crippling. A trend that is also traceable through multi-layered parameters.

But those trends are now crossing international borders amid the visible recovery of China thanks to the fast sweeping policies adopted hastily while putting complete regions in quarantine.

The rest of the world is taking the next knocks where epic centres are moving across continents and top experts are warning that the worst is expected here in Africa where the basics of health systems are weak or absent.

The Head of the UN Guterres in his report “Shared responsibility, global solidarity: Responding to the socio-economic impacts of COVID-19,” is predicting dire consequences all over the world due to the virus with severe impacts expected in Africa.

In his own words ” “It is essential that developed countries immediately assist those less developed to bolster their health systems and their response capacity to stop transmission.

“Otherwise we face the nightmare of the disease spreading like wildfire in the global south with millions of deaths and the prospect of the disease reemerging where it was previously suppressed.

“Let us remember that we are only as strong as the weakest health system in our interconnected world.”

Economists usually have a hard time working out the potential costs of epidemics because of their unique characteristics and the uncertainty associated with them but Sarwant Singh from Frost Sullivan draws a much greyer image “Apart from applying the brakes on GDP growth, I also foresee the outbreak affecting key macroeconomic indicators like oil prices and interest rates.

“I believe oil prices will fall as a result of reduced demand from China, the world’s largest importer of oil, and lowered demand for jet fuel due to widespread travel restrictions.

“I also expect more and deeper cuts to interest rates than in 2019 as countries scramble to shore up their tottering economies.”

Apparently, the pandemic is hitting the global economy and the core of international trade in particular on multi fronts.

But,  amazingly, there were uncalculated side effects,  the Covid-19 is deranging a trade war in progress between the US and China.

This is observed from the tone of the American president Donald Trump while saying “nobody cares about trade” referring to the notion that his complete focus now is on combating the deadly virus where the US has turned the world epic centre.

The pair are cooling and abandoning cold war mentality for a moment to join hands against a global enemy that doesn’t bother about tariffs geography or trade deals.

At the beginning of the crisis, there were inflammatory accusations thrown out in the air by the two powers with Trump insisting in naming the virus a Chinese one, his secretary of state has also labelled it Wuhan virus .in turn spokesman from china accused the US ARMY of importing the disease to Main Land China.

Pre Covid-19 bilateral trade relations were tit for tat slamming of retaliatory tariffs targeting the exports of each country with severe consequences beard by many important sectors in the two giant economics and the global economy with so many screens blinking red in many major stock markets.

Political economists are yet to come out with a clear analysis about what the trade relations and the trade war courtyard will look like in a post epidemic international trade dynamics.

Whether both countries will tend to escalate and continue down the gloomy path of mutual cracking or to slow down their aggressive behaviour, it all depends on the size and scale of the pandemic and the associated contamination efforts which have been described by the chief of the international chamber of commerce as having the same genes of protectionism in a warning shot in form of a coded message to the players behind the ongoing trade gamble.

“What you are seeing is a way is kind of an avatar for what happens with protectionism,” John Denton said.

“You are seeing borders being closed, goods being redirected, supply chains being redesigned, whole sectors of the economy feeling the impact of the closing of borders, ” he added.

Denton also called on China to continue its market reformation process once the pandemic is over.

For China, Coronavirus has already proved more deadly than a trade war with the US, as millions lost their jobs with the unemployment jumps to 6.2 per cent for  January and February from 5.2 per cent in December.

The two-month increase is seen as larger than accumulative gains over 18 months. It’s a dramatic collapse for the Chinese industrial production, asset investments and other sectors of the reeling economy.

All caused by the sudden measures to contain and defeat the virus amid a widespread closure of manufacturing operations, the industrial production indicator also declined by 13.5 per cent according to combined official data for January and February.

The picture in the US is not less gloomy with the American soil being crowned the global epic centre of Covid-19, millions of American filed for unemployment and it seems the largest economy in the world is heading steeply towards a recession.

Calculating the aftermath of the mess created by the epidemic to check the status of the trade war will be a difficult task for economic scientists and observers but we expect things to chill down for a while in a breathtaking period allowing for both countries evaluate their losses from this “invisible enemy” and to reallocate resources to rebuild critical industries and sectors that got hit the most.

We expect the pairs also to engage in direct heavy negotiations to finalize trade deals and settle their commercial disputes in a speedy manner once this is over and that is triggered by the necessity of a cooperative spirit to restore trust and build confidence not only to the clashing economies but for the survival of the markets all over the world.

Let’s not forget the two countries are the leading economics in the world and the second and third merchandise exporter worldwide closely behind the European Union.

The world needs both elephants to sustain healthy international trade operations and to resume ordinary economic activities in shattered international production spots.

Strong international trade leaders in a cooperative mood will stabilize international markets and help them shield from the massive shocks and the implications of disrupted supply chains.

China needs urgent waves of heavy demand to be stimulated to deter a looming recession, the ability to do that lays on the hands of the rest of the world including its strongly performing economies like the US and the EU and so a new environment of responsible trade should be borne out of this.

Europe and Japan got their share of the pain s well with poor Q4 performance pushing them steady towards recession, but make no mistake their great reliance on international trade could be a turning point.

Stimulated and healthy global trade networks work for everyone .it’s the time to abandon risky adventures on international trade arena and for the WTO to step in and make a difference by seeking new ways of improving trade relations and introduce emergency international trade channels and procedures immunizing the global economies against epidemics, the unknown and the unexpected.

_ Abdallah Abdelkarim is CEO and Lead Consultant at GLOBAL 2T GROUP, a DBA student at ESC Clermont Business School in France, he is also the Secretary-General of Arab Best Award.

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