OECD’s September report to raise the alarm over US-China trade war

OECD’s September report to raise the alarm over US-China trade war

Today, the OECD will present a report outlining the short-term prospects for the global economy. A key risk outlined in

oecd september 2018 report

Photo: OECD

Today, the OECD will present a report outlining the short-term prospects for the global economy.

A key risk outlined in May’s report was that trade tensions “might significantly affect the economic expansion and disrupt vital global value chains”. These concerns were echoed this month over slowing economic growth in China: the world’s second-largest economy grew 6.7% in the three months to July, the slowest pace since 2016.

Since May, the US-China tariff spat—now largely considered a ‘trade war’—has intensified. This week, Beijing and Washington announced that an additional $260 billion worth of goods would be imposed on each other by September 24.

Given that the Sino-American trade war affects 40% of the global economy and has intensified since May, the risks of such tensions will likely affect global supply chains and consequently affects smaller economies reliant on supplying raw materials to the top-two economies. For example, the US is Hungary’s second-largest export destination for cars and vehicle parts and Taiwan’s electronic parts industry accounting for 40% of total exports. Therefore, expect the OECD to take a pessimistic global economic outlook on the account of US-China trade war affecting global supply chains.

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