Local and Global Economic Turmoils – Biden's New Tariffs and US Debt Crisis Amid Fastest Declining Economy of 2024
Birgul COTELLI, Ph. D.
Top 100 Thought Leader Thinkers360??Board Director??Transformation??Ethics??Technology ??Innovation??Governance Risk Compliance ??VR AR AI??Metaverse??LinkedIn Top Voice in VR (May-Aug 24)??Speaker
The fastest-declining economy in the world in 2024 is identified. Using average annual GDP growth rates from the past five years, there is a comprehensive list of the 15 fastest-declining economies.
Lebanon is the fastest-declining economy in 2024, with an average GDP growth rate of -9.96% over the past five years. Lebanon's economic challenges are deeply rooted in long-term issues such as excessive government spending, widespread corruption, and a severe banking crisis. The Lebanese pound has devalued significantly, and the majority of the population now lives in poverty. This economic turmoil is exacerbated by political instability and external pressures.
Also, on a more global level, President Biden's new tariffs have created significant global economic ripples. These tariffs, targeting various imports, are intended to protect domestic industries and address trade imbalances. However, they have also led to increased costs for businesses and consumers, both in the United States and internationally. Global supply chains are experiencing disruptions, and countries affected by the tariffs are considering retaliatory measures, which could escalate trade tensions and impact global economic growth.
The United States' debt trajectory is now seen as entering a danger zone, with projections indicating unsustainable growth. Rising interest rates and increased government spending are contributing to a burgeoning debt load that could reach critical levels. This situation raises concerns about the country's fiscal stability and the potential for negative impacts on economic growth and financial markets. Policymakers are under pressure to address the growing deficit to prevent long-term economic consequences.
The Fastest Declining Economy in the World in 2024
Let’s delve into the world of economic trends and explore the fastest-declining economy in 2024. Based on the average annual GDP growth rates over the past five years, the country facing the most significant decline is identified.
Lebanon?takes the spotlight as the fastest declining economy in the world for 2024.?Its average GDP growth rate over the past five years stands at -9.96%. Unfortunately, Lebanon has been grappling with severe economic challenges, including a financial crisis that began in 2019 and has persisted into 2024.
Now, let’s discuss a couple of other noteworthy points.
Japan’s Recession
Japan unexpectedly slipped into a recession after its GDP shrank for two consecutive quarters. In Q4 2023, the Japanese economy contracted by?0.4%?year-over-year, following a?3.3%?decline in the previous quarter. As a result, Japan lost its position as the world’s third-largest economy to Germany. Japan’s GDP now hovers around?$4.2 trillion, while Germany’s stands at?$4.4 trillion. The yen’s?9%?depreciation against the dollar in 2023 played a role in this shift, despite boosting Japanese export competitiveness.
United Kingdom’s Inflation Battle
The UK, despite its lower inflation rate compared to the eurozone and the United States, still faces challenges. Inflation in the UK is measured at?2.3%, while the US experiences?3.4%?inflation, and the eurozone reports?2.4%. Chancellor Jeremy Hunt is closely monitoring these developments.
Growth Projections
The International Monetary Fund (IMF) predicts that the UK economy will outpace several European counterparts over the next six years. By the end of 2029, the UK’s gross domestic product (GDP) is expected to increase by?8.8%, compared to?8.3%?for France,?5.7%?for Germany,?3.5%?for Italy, and?4.4%?for Japan.
Positive Aspects in the Global Economic Outlook
Despite the challenges, there are bright spots. Private consumption is projected to increase by approximately?4%, outpacing total income growth of?2.6%. This boost, fueled by borrowing, can stimulate economic activity.
Regions like?India?are showing promising growth rates. India is projected to grow by?6.5%?in 2024, supported by strong public investment and a thriving service sector. As of April 2024, India ranks among the top 10 fastest-growing economies globally.
Similarly,?China?aims for around?5%?growth by capitalizing on its robust manufacturing and trade sectors.
While challenges persist, there are rays of hope in the global economic landscape.?
Biden’s New Tariffs Spark Global Economic Ripples
US President Joe Biden recently announced significant tariff increases on a range of Chinese imports, including electric vehicle (EV) batteries, computer chips, and medical products. This move, aimed at appealing to American voters dissatisfied with his economic policies, risks sparking an election-year confrontation with Beijing.
In a speech at the White House Rose Garden, Biden emphasized his commitment to ensuring fair competition for American workers. In response, China’s commerce ministry expressed strong opposition and pledged to retaliate. The new tariffs will maintain those imposed by former President Donald Trump while increasing others significantly. For instance, duties on EVs will rise to over 100%, semiconductor tariffs will double to 50%, and tariffs on Chinese steel and aluminum will increase by 25%.
These measures, impacting $18 billion worth of Chinese imports, have several key implications:
1. Inflationary Pressures: Higher production costs due to tariffs will contribute to inflation both in the US and globally, especially in the electronics, automotive, and consumer goods sectors.
2. Green Energy Impact: Increased costs for renewable energy projects may slow the adoption of clean energy technologies and hinder the achievement of climate targets.
3. Investment Hesitancy: The uncertainty and higher costs could reduce investments in green technologies, slowing innovation and climate change mitigation efforts.
4. Strained International Cooperation: US-China trade tensions may complicate global climate negotiations and broader international cooperation.
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5. Technological Decoupling: The US and China are likely to further develop their independent technological ecosystems, reducing reliance on each other's technology.
6. WTO Functionality: The tariffs reflect a lack of practical policy tools for dealing with China, exacerbated by the US's role in disabling the World Trade Organization's dispute resolution mechanism.
7. Global Trade Precedent: The US tariffs may encourage other countries to adopt similar measures to address their economic challenges with China.
8. Deglobalization Trend: Companies may diversify supply chains away from China, increasing domestic production, as seen with the US's investments in semiconductor manufacturing through the CHIPS and Science Act.
This escalation in tariffs represents the start of a prolonged and intense trade conflict between the US and China, potentially reshaping global economic dynamics.
US Debt Path Now Seen Entering a Danger Zone
The current fiscal landscape, particularly among G-7 nations, presents a nuanced tableau of economic dynamics, characterized by a delicate balance between debt sustainability and market resilience. The recent decision by G-7 finance chiefs to omit fiscal sustainability from their agenda is reflective of divergent perspectives within economic circles regarding the immediacy of debt-related concerns versus the paramountcy of addressing emergent crises.
One prevailing argument, espoused notably by Nobel laureate Paul Krugman, posits that certain historical instances, such as Japan's debt dynamics, illustrate that high debt burdens need not precipitate immediate fiscal crises, especially for nations borrowing in their own currency. This viewpoint emphasizes the importance of distinguishing between external debt crises, typified by countries borrowing in foreign currencies and subject to currency fluctuations, and internal debt dynamics where borrowing occurs in domestic currency, affording greater policy flexibility.
Conversely, voices such as Maya MacGuineas advocate for prudent fiscal management to mitigate risks associated with burgeoning debt levels. MacGuineas underscores the concept of "fiscal space," delineating the capacity of national treasuries to respond effectively to exigencies without exacerbating debt burdens or triggering market aversion. The cautionary tale of the United Kingdom under then-Prime Minister Liz Truss underscores the tangible ramifications of fiscal imprudence, wherein unfunded tax cuts precipitated market turmoil necessitating intervention by the central bank.
In extrapolating these lessons to the United States, economists such as Michael Feroli warn of analogous vulnerabilities stemming from the confluence of escalating federal debt and limited market liquidity. The absence of commensurate expansion in the capacity of primary dealers to absorb burgeoning Treasury supply underscores potential fissures within the market's infrastructure, susceptible to sudden shocks akin to those witnessed during the onset of the COVID-19 pandemic.
US Treasury Secretary Janet Yellen's nuanced perspective, prioritizing net debt interest payments over the debt-to-GDP ratio, underscores the multifaceted nature of evaluating fiscal sustainability. Yellen's emphasis on real debt service costs underscores the importance of contextualizing debt metrics within broader economic parameters, particularly inflation dynamics.
However, projections by 高盛 economists underscore the imperative of anticipating future challenges, including unforeseen contingencies such as armed conflicts, which can strain fiscal resources and recalibrate market perceptions. The historical resonance of the G-7 venue in Stresa, Italy, serving as a reminder of past geopolitical upheavals, imbues contemporary deliberations with a sobering sense of historical precedent.
In navigating these complexities, policymakers must balance the imperatives of debt sustainability with the exigencies of crisis preparedness, cognizant of the evolving economic landscape and the imperative of adaptive policy frameworks. As economic paradigms evolve, informed discourse and measures remain indispensable in safeguarding fiscal stability and market resilience in an increasingly interconnected global economy.
In conclusion, the economic landscape portrayed across these segments illuminates a world grappling with diverse challenges, from localized financial crises to escalating global trade tensions and burgeoning debt burdens. Amidst these complexities, the imperative of proactive policy responses becomes increasingly evident.
Lebanon's stark economic decline underscores the urgency of addressing underlying structural vulnerabilities and implementing robust reforms to foster resilience and sustainable growth. The escalation of tariffs between the United States and China underscores the need for diplomatic engagement and multilateral cooperation to mitigate the adverse impacts of trade disputes on global economic stability.
Meanwhile, discussions surrounding US debt underscore the delicate balance between fiscal sustainability and market resilience, emphasizing the importance of prudent fiscal management and crisis preparedness. As economic paradigms evolve and geopolitical dynamics shift, informed discourse and adaptive policy frameworks remain indispensable in navigating the challenges and opportunities shaping the global economic landscape.
In essence, concerted efforts to address these multifaceted challenges while harnessing emerging opportunities are essential to promote inclusive and sustainable economic growth, both domestically and internationally. Through collaborative action and forward-looking policymaking, the global community can navigate the current complexities and lay the groundwork for a more resilient and prosperous future.
Sources – investingchannel.com, finance.yahoo.com, gulfnews.com, bloomberg.com
#LebanonEconomicDecline #JapanRecession #UKInflationBattle #GlobalGrowthProjection #PositiveEconomicOutlook #USChinaTradeTensions #BidenTariffs #GlobalEconomicRipples #DebtPathConcerns #FiscalResilience
#GDP #Economy #EconomicGrowth #G7
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Top 100 Thought Leader Thinkers360??Board Director??Transformation??Ethics??Technology ??Innovation??Governance Risk Compliance ??VR AR AI??Metaverse??LinkedIn Top Voice in VR (May-Aug 24)??Speaker
6 个月Amid technological hypes, an eye on the macroeconomics helps understanding further challenges we are in. Your engagement is priceless. Thank you Dr. Martha Boeckenfeld.
Lead Future Tech with Human Impact| CEO & Founder, Top 100 Women of the Future | Award winning Fintech and Future Tech Influencer| Educator| Keynote Speaker | Advisor| Responsible AI, VR, Metaverse Web3
6 个月Birgul, your insights on the economic turmoil are spot on. The ripple effects of Biden's new tariffs and the US debt crisis are concerning. Thanks for sharing your article!