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Looking into US, China trade war

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Some experts have indicated that, if the trade war between the United States (US) and China escalates, the situation is likely to affect growth of the Africa region. They, however, say effects on Malawi will be minimal given the county’s limited interconnection to the rest of the region.

Earlier this year, the US announced it would impose import taxes of 25 percent on steel and 10 percent on aluminium. The tariffs were to be wide-ranging and would include China.

China responded last month with retaliatory tariffs worth $3 billion of its own against the US on a range of goods, including pork and wine. Beijing said the move was intended to safeguard its interests and balance losses caused by the new tariffs.

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International Monetary Fund Resident Representative to Malawi, Jack Ree, said threats of a potential trade war between the two giant global economies can affect the global growth outlook, which would then weigh on recovery of commodity prices, a situation that would negatively affect growth of the Africa region.

Ree said while he does not believe that the looming dangers of a trade war can spread to a global currency war, people should expect that China and other trade surplus countries will be increasingly pressured to embrace more exchange rate flexibility and that this can then translate to higher cost of imports from China— which may affect both consumers and businesses negatively, including in Malawi.

“Any slippage of the global growth from its ongoing recovery path will weigh on recovery of commodity prices and; hence, affect the growth of African region, negatively.

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“…I personally do not believe that an all-out trade war can really take place simply because the world is too much interconnected,” he said in an emailed response on Monday.

T h e Economics Association of Malawi (Ecama) has said smaller economies, Malawi inclusive, would be disadvantaged from the after-effects of the exchange between the two leading world economies.

And in the even t that the disagreements escalate, Ecama President Chikumbutso Kalilombe, said this would affect the economy of the whole world.

“…The direct impacts would come literally from effects of the crossfire; that is, a case of when elephants fight, the grass also suffers.

“If this escalates, we might end up in a situation where some companies relocate and, if dealing with Malawi, you might find things becoming harder, when specifically dealing with some companies,” Chikumbutso said.

He said some impacts may also be experienced owing to supply chain interruptions.

Meanwhile, US President Donald Trump has instructed officials to consider a further $100 billion (£71.3 billion) of tariffs against China, in an escalation of a tense trade stand-off.

These would be in addition to the $50 billion worth of US tariffs already proposed on hundreds of Chinese imports.

China’s Ministry of Commerce responded, saying China would “not hesitate to pay any price” to defend its interests.

The tit-for-tat trade moves have unsettled global markets in recent weeks.

The latest US proposal came after China threatened tariffs on 106 key US products.

In response to Trump’s l a tes t announcement, Foreign Minister Wang Yi said: “China and the US, as two world powers, should treat each other on the basis of equality and with respect.

“By waving a big stick of trade sanctions against China, the US has picked a wrong target.”

Ministry of Commerce spokesman, Gao Feng, said: “We do not want to fight, but we are not afraid to fight a trade war”.

He said that if the US side ignores opposition from China and the international community and insists on “unilateralist and protectionist acts,” then China will “not hesitate to pay any price, and will definitely strike back resolutely… to defend the interests of the country and its people”.

Analysts have warned of the risk of a full-blown trade war for the global economy and the markets, and believe ongoing behind-the-scenes negotiations between the two giants are crucial.

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