The effects of the Trade War between USA and China according to Michael Plummer

6 February 2020

“Before the Corona Virus, all the attention was focused on Global Trade and its consequences all around the world”: Alessandro Merli, Associate Fellow of Johns Hopkins University and Adjunct Professor of BBS, introduced the speech of Michael Plummer, Director of Johns Hopkins University SAIS Europe.

Professor of International Economics since 2001, Plummer had illustrated to the BBS Community the impact that relations between the US and China will have on global investments, following the agreement signed on 15 January.

“If we read the financial newspapers – explains Plummer – we immediately realize how the word ‘crisis’ has always been on the crest of the wave, but not ‘trade’, the real protagonist of the last twenty years. Trade has been a source of great economic prosperity, but political liberalism has come out strongly threatened, creating significant global uncertainty”.

From the skepticisms raised by the no global movement born in Seattle in 1999 to the increasingly predominant weight of China: “Future history books will remember this period as extremely complicated”, Plummer said.

“The United States, in particular, is adopting an increasingly conservative approach, which cannot ignore the weight of China of President Xi Jinping. In the 90s – underlined the economist – China was not even remotely considered among the world powers, while with the beginning of the new millennium it was the protagonist of a real ‘trade war’ against America”.

The radical change of the main political actors has accompanied a drastic inflection of the global economy which has led to a clear contrast between losers and winners, with the advent and change of course of technology: “Remember Blockbuster? – Plummer asked the Community present at the meeting – Many have lost jobs because of the Internet”.

What will be the consequences of the pact on the international economy? – Asked the students – “The current system is going on, but it will continue to face challenges for which it is not ready at the moment” replied Plummer, who claimed that cooperation with Asian countries offers new hopes for multilateral agreements. Decisive, according to Plummer, to extend a hand to Vietnam and Japan, engaged in reform programs.

But what are the consequences for Europe? “Phase 1 of the China-US agreement – concludes Plummer – will have a minimal impact in Europe in terms of trade diversion, while helping to stabilize the markets. However, this will only be valid for easy objectives; the subsequent phases will be much more difficult and could further destabilize the markets, obviously without prejudice to Trump’s re-election”.