World Economic Outlook Update: On Trade Policy Risks

From Maury Obstfeld, IMF, Chief Economist, today:

…the risk that current trade tensions escalate further—with adverse effects on confidence, asset prices, and investment—is the greatest near-term threat to global growth. Global current account imbalances are set to widen owing to the United States’ relatively high demand growth, possibly exacerbating frictions. The United States has initiated trade actions affecting a broad group of countries, and faces retaliation or retaliatory threats from China, the European Union, its NAFTA partners, and Japan, among others. Our modeling suggests that if current trade policy threats are realized and business confidence falls as a result, global output could be about 0.5 percent below current projections by 2020. As the focus of global retaliation, the United States finds a relatively high share of its exports taxed in global markets in such a broader trade conflict, and it is therefore especially vulnerable.

Here’s the updated forecasts:

29 thoughts on “World Economic Outlook Update: On Trade Policy Risks

  1. Moses Herzog

    My Dad used to tell a silly joke. A lot of people with think it’s stupid but it always made me smile and kind of chuckle inside myself when he said it. I guess it’s kind of a “Dad joke”and not malicious or said with malintent (quite the opposite). But oftentimes when some celebrity or person of high accomplishment had a stereotypical Jewish name, like Cohen, or something, my Dad would say “That’s a nice Irish name” or “There’s a nice Irish name”. It was his way of saying (he was talking to our family but somehow it felt like he was just talking to me) “Hey wake up. Perk your ears up simpleton. Notice how many of them excel in life in all different fields under the sun.” (with the possible exception of sports, but even there you could find some). And also seemed to be some kind of subtext there my Dad was trying to get across of “Notice how they stress education, knowledge, and maybe there’s some connection to that and how Jews excel in all areas of life”.

    So in honor of my now dead father I would like to say; “Obstfeld….. there’s a nice Irish name”.

  2. pgl

    “Global current account imbalances are set to widen owing to the United States’ relatively high demand growth, possibly exacerbating frictions.”

    What an incredible statement. Only a complete moron (which Trump is) would declare the higher import demand from economic growth to be the rest of the world robbing our piggy bank. You know Trump is dumb enough to think a recession might be a good idea as it would reduce the trade balance. Of course Trump made Lawrence Kudlow a chief economic adviser – so why am I surprised at the economic illiteracy coming from this White House.

  3. pgl

    Two additional interesting tidbits:

    “the Fed is on track to continue raising interest rates over the next two years, tightening its monetary policy compared with other advanced economies and strengthening the US dollar. The dollar has already appreciated broadly since April, and financial conditions facing emerging and frontier economies have become somewhat more restrictive.”

    In other words, the Trump fiscal stimulus could easily crowd out both net exports and investment. As far as Europe:

    “Growth remains generally strong in advanced economies, but it has slowed in many of them, including countries in the euro area, Japan, and the United Kingdom.”

    The ECB, the Bank of England, and the Bank of Japan have been keeping interest rates really low so maybe these regions need a dose of fiscal stimulus. I guess the Trumpsters could argue they need more military spending but one can think of more constructive forms of additional government spending.

      1. PeakTrader

        Maybe, you grossly underestimate “Team Trump,” like you grossly underestimated Reagan.

    1. PeakTrader

      Reagan winning the Cold War in the ‘80s benefitted the U.S. economy tremendously in the ‘90s.

      Trump winning the trade war will also benefit the U.S. economy tremendously.

      1. PeakTrader

        And, the U.S. has an enormous advantage to win with much weaker trading partners, facing higher costs, and a strengthening U.S. economy

        1. pgl

          This statement might be true if our economic policies were run by smart people. Alas Team Trump is ALMOST as dumb as you are.

          1. PeakTrader

            Pgl, “dumb” was supporting ”wrongway” Obama and Uncle Joe Biden for eight years, although I cut you some slack, because McCain and Romney were the challengers.

      2. pgl

        You write some incredibly stupid statements but this one takes the cake. The Reagan defense build up raised real interest rates crowding out investment demand and led to the massive current account deficits. Now you may think this crowding out help the 1990’s economy but as usual your understanding of economics is really beyond stooopid,

        1. PeakTrader

          Pgl, only an idiot would want lower interest rates by continuing the Obama Depression.

          You also underestimate Trump strengthening the economy into the 2018 and 2020 elections.

          And, of course, you like the lunatic fringe taking over the Democrat Party.

          1. pgl

            “Pgl, only an idiot would want lower interest rates by continuing the Obama Depression.”

            We know Peaky is stupid. We know he lies 24/7. But did we know he would stoop to such a pathetic false accusation? I guess so. Troll on Peaky!

        2. PeakTrader

          Pgl, again, you prove you’re stupid. Higher interest rates are expected from strong growth. Real Gross Private Domestic Investment shot up 50% in the early Reagan years, mostly from the tax cuts and defense spending, which produces much R&D, along with spin-offs. Of course, a relative booming economy increases trade deficits.

          1. pgl

            PeakDishonesty lied again!

            ‘Real Gross Private Domestic Investment shot up 50% in the early Reagan years, mostly from the tax cuts and defense spending, which produces much R&D, along with spin-offs. Of course, a relative booming economy increases trade deficits.’

            Even FRED knows PeakDishonesty lied here:


            As of 1981Q1, real private domestic investment was $971.65 billion. By the end of 1982, it had declined to $780.3 billion. That is not a 50% increase. It was a dramatic decline produced by the high real interest rates every real economist notes happened in part because of the higher defense spending and the 1981 tax cut. The 1982 recession was horrific but PeakDishonesty calls it a booming economy? And the fall in net exports was due to a dramatic dollar appreciation that every real economist notes.

            PeakDishonesty once again makes a total fool out of himself as he deliberately misrepresents our economic history. Of course he will fire back with more of his childish rants. He always does!

          2. CoRev

            Komrad pgl, as I’ve admitted, I make it my mission to correct your lies and abject errors. Peak said: “Real Gross Private Domestic Investment shot up 50% in the early Reagan years,…” and you countered with “By the end of 1982 (an early Reagan year), it had declined to $780.3 billion.” Your lie was in ending there, because after 1982, an early Reagan year, it went up to $1185.779 or ~52% by QR 1984, another early Reagan year.

            Komrad pgl, not only did you lie. You lied very poorly. What does your psychiatrist say about your personality/mental disorder driving you to act so poorly? Have they suggested a solution to change to help your disorder? I could!

  4. pgl

    Collusion in Seychelles

    Several Russians, some linked to the Kremlin, participated in meetings in the Seychelles in January 2017 and are subjects of an ongoing investigation into Russian meddling in the 2016 presidential election, according to the island’s aircraft data and sources with knowledge of the meetings. Special Counsel Robert Mueller is examining a series of meetings that took place in the Seychelles, an archipelago in the Indian Ocean, as part of a broader investigation into Russian meddling. The inquiry into the meetings suggests there is growing interest by the Mueller team into whether foreign financing, specifically from Gulf states, has influenced President Donald Trump and his administration.

    1. Moses Herzog

      The whole sword dance thing in Saudi Arabia is still sticking out in my mind. I could get the video, but even for an anti-trump guy (which I am) that one is painful to watch. That one always gets me that Republicans have nothing to say about after they made it a crime for Obama to lower his head for some medal they gave him or something. Very few men would prostate themselves like trump did to the Saudis–much less a narcissistic b*stard like trump. There was something going on there, similar to his prostrating himself to Putin. That sword dance did not appear out of a vacuum—some MAJOR payola going on there.

    1. pgl

      As Trump takes us out of the WTO – the rest of the world is just laughing at us. China – in. Japan – in. EU – in. Yep – they are all saying they do not need Trump’s America.

    2. pgl

      “The imported wine and cheese could hurt sales by Japanese wineries and dairies, but Japanese consumers have historically coveted such European products.”

      Your link shows a picture of some really good red wine. I want a bottle for dinner. Too bad Trump wants us to pay more for awesome French wine.

      OK – it is raining outside so time to open that bottle of Robert Mondavi!

      1. Moses Herzog

        I’m going on a “secret” “vodka run” tomorrow. Why “secret”?? 2 reasons, 1) there is a certain cackling hen in this household that does not allow alcohol in the house. 2) I am going to down a 740ml bottle in roughly 3–4 hours and get sauced. I’m hoping this is not considered to be “Putin Vodka” as the stuff I usually get is rancid American rotgut stuff. Either rancid vodka from Missouri or rancid gin from Arkansas. Consider it my personal charitable contribution to the “red states”. Maybe the money multiplier effect will syphon off an extra quarter for CoRev’s first economics text—we can be futilely hopeful for humanity can’t we?? (especially when sauced??)

  5. PeakTrader

    When the U.S. imposed tariffs on steel, aluminum, solar panels, and washing machines, that affected many countries. Some of them retaliated with tariffs on U.S. products. Therefore, the U.S. retaliated, in response, which caused more foreign retaliation, etc..

    If the U.S. imposed tariffs only on one country – China – I doubt that would slow the dumping through third countries, world prices would still be too low, and U.S. production, of those goods, would continue to shrink. I think, negotiated settlements or renegotiations, e.g. NAFTA, can be accomplished much easier than negotiating with China.

  6. pgl

    Hey Peaky – CoRev is better at lying than you are:

    “Your lie was in ending there, because after 1982, an early Reagan year, it went up to $1185.779 or ~52% by QR 1984, another early Reagan year.”

    The Stephen Moore style. And we know Menzie sees Moore as always honest – right?

    Lord – the stupidity here gets worse and worse. Yes when Volcker reversed course after slamming the economy into the worse recession since the Great Depression, investment and real GDP recovered. That was monetary policy not that incoherent gibberish from PeakDishonesty.

    You two illiterates should find Mankiw’s first macroeconomic textbook as it lays out the real story for this period. And his excellent account matches what I and other economists have said.

    Of course we do not expect CoRev to read actual economics as his day job is praising Herr Trump and St. Reagan with the usual dishonest and stupid nonsense like his latest. Stephen Moore applauds you!

    1. CoRev

      Konrad pgl, thank you for admitting your lie. Oh, and that’s another compliment. Are you sure you’re feeling well enough to be commenting? Your psychiatrist may suggest otherwise.

      1. pgl

        Listen jerk. I do not lie. You may think you are clever with these pathetic retorts but all you are doing is trolling. If Team Trump is paying you for this garbage, you have really let them down as it is beyond weak.

        Continue if you wish, however, as everyone here gets you are really dumb. I’m sure your poor mother would be beyond embarrassed at her argumentative idiot son.

      2. pgl

        I hear CoRev loves his new broker even though the broker has ripped him. The scam is actually quite simple. CoRev gave him $10,000 of which the broker stole half and sent CoRev an invoice thanking him for $5000 a year ago. Then the broker put $2500 back into the account and told CoRev he got a 50% annual return.

        Yes CoRev is that incredibly stupid. After all he bought PeakDishonesty’s claim that Reagan’s early years saw a 50% increase in investment demand which is the same lie as CoRev’s scam.

        Now maybe CoRev is not the most gullible idiot ever but then he knows full well PeakDishonesty lied. So which is it – is CoRev really this stupid or just a pathetic little liar?

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