- The IMF warns that an escalation in trade tensions between the US and China could cause global economic damage, particularly through supply chain disruptions and increased inflation.
- Geopolitical tensions are already leading to a shift in global trade, with the US and China trading less directly, creating inefficiencies.
- Trump’s aggressive tariff policies and China’s internal problems, such as the border conflict with India, are further exacerbating economic uncertainties.
Trade relocation due to geopolitical tensions
The current tensions between the US and China over trade and tariffs have attracted the attention of international organizations such as the International Monetary Fund (IMF). Gita Gopinath, deputy managing director of the IMF, warned that further escalation of tariffs could have serious consequences for the global economy.
In recent years, global trade has increasingly shifted along geopolitical lines. Trade relationships, particularly between the US and China, are becoming increasingly difficult, leading to a realignment of global supply chains.
According to Gopinath Although the overall volume of world trade remains stable, the players are changing: the USA and China are increasingly trading less directly with each other, while other countries step in as intermediaries. However, this leads to inefficiencies and higher costs, which could hinder the economic recovery after the pandemic.
Both the United States and the European Union have significantly increased their tariffs on Chinese goods in recent years as they accuse China of unfair trade practices. In response, Beijing has imposed tariffs on European products. Such “tit-for-tat” measures not only put a strain on trade relations but, according to the IMF, could also… inflation continue to heat up. Higher tariffs lead to rising prices, increasing economic pressure on consumers and businesses and hampering the global recovery from the economic fallout of the COVID-19 pandemic.
Trump’s tariff policy and its risks
During his presidency, Donald Trump relied on aggressive tariff measures. He proposed tariffs of up to 60% on Chinese products and even up to 100% on goods from Mexico. This policy was aimed at protecting the American economy, but could have long-term negative consequences. Tim Adams, president of the Institute of International Finance (IIF), warned that extreme tariffs could halt progress in fighting inflation. Adams highlighted that while such measures could generate revenue in the short term, they would destabilize the global economic structure in the long term.
China faces simultaneous internal and external challenges. In addition to an economic slowdown, tensions with India and Taiwan are at the heart of the geopolitical challenges.
The border conflict with India in particular is making the situation worse. Although China remains one of India’s most important trading partners, political tensions could lead to long-term economic dislocation. India is trying to maintain economic relations with China despite the tensions, but is acting cautiously.
The ongoing trade conflicts between the USA, China and the EU could fundamentally change the global economic structure. The IMF and other experts warn that escalating tariffs could not only destabilize global supply chains but also lead to a new era of economic isolation. The costs for everyone involved would be high, and such a path could have a lasting impact on global growth.
Possible consequences for the crypto market
The US-China trade dispute can impact the crypto market in several ways:
- Escape to alternative investments: Investors may increasingly look to cryptocurrencies as a hedge against the volatility of traditional markets and currencies.
- Impact on mining: The dominant role of the USA in Bitcoin mining could be affected by trade restrictions, affecting global mining capacity.
- Regulatory uncertainties: New trade regulations and geopolitical tensions can lead to changes Regulations and lead to uncertainties in the crypto sector.