In addition to a likely escalation of trade tensions with China, potential US tariffs on imported cars and car parts on the basis of national security considerations might hamper future growth prospects. Once the tariffs are issued, affected countries can issue a formal complaint with the World Trade Organization WTO and announce counter measures in compliance with global trade rules.
There is consensus that the WTO and the rules of trade need to be revised, with recent reform proposals by the European Union , Canada , and like-minded countries that seek to address current shortcomings of the system.
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Global Growth to Weaken to 2.6% in 12222, Substantial Risks Seen
Skip Navigation. Markets Pre-Markets U. Key Points. The global economy faces three big challenges, said Tao Zhang, a deputy managing director for the International Monetary Fund.
Speaking with CNBC, Zhang said those are: tensions on the trade front, fiscal and financial risk, as well as ongoing challenges on how inclusive growth can be attained. VIDEO Squawk Box Europe.
World economic outlook: Trade tensions and tariffs a major threat to global economic growth
The global energy transformation will affect social, economic and environmental factors that are often among the root causes of geopolitical instability and conflict. Climate change, rapid urbanization, high unemployment, discrimination, inequality and other major trends can create conditions that increase poverty and exclusion, promote the mass movement of people, cause violent conflict, and political extremism—all forces that have the potential to affect geopolitical stability.
While the characteristics and rapid growth of renewables will generate new risks, the energy transformation will also create opportunities to overcome some of these challenges. The energy transition involves a profound economic, industrial and societal transformation. It could affect prosperity, employment, and social organization as much as the first Industrial Revolution.
The shift to renewables brings several macroeconomic advantages. While the switch to renewable energy has the potential to create an additional eleven million jobs in the energy sector by , it may at the same time reduce employment in specific sectors such as coal mining. The most labour-intensive form of fossil fuel extraction, the coal sector employs a global workforce of at least 9 million people, more than half of whom are employed in China.
Mine closures frequently have a deep and long-term impact on local communities and economies, causing marginalization, social dislocation, and disputes between workers and employers.
China’s Future Development: Challenges and Opportunities | Cato Institute
The energy transformation may deepen existing political divisions or create new ones that in their turn create geopolitical consequences. Coal miners were among the most vocal supporters of Donald J. Trump during the US Presidential elections; and recent cabinet changes in Australia and France can be linked directly to disagreements over the energy transition.
In China, protests against air pollution have spurred the government to make the fight against it a political priority. The government came to an agreement with trade unions to shut down all coal mines by the end of , while investing million Euros in affected mining regions over the next decade. The global fossil fuel system has a built asset value estimated at 25 trillion US dollars and continues to add one trillion dollars of assets each year.
Asset stranding occurs when assets have suffered unanticipated or premature write-downs, devaluations or conversion to liabilities. The process has already started. The risk of stranded assets might not be fully reflected in the value of companies that extract, process or distribute fossil fuels. Moreover, these assets are counted when countries calculate their national resources.
Were the risks to be priced in, the value of these companies, and the credit ratings of certain countries, could experience a sudden drop.
One study found that no less than 1 2 trillion US dollars of financial value could be lost in the form of stranded assets. International bodies, such as the Financial Stability Board, are strongly encouraging firms to increase their disclosure of risks relating to climate change. Renewables will also induce geopolitical effects by mitigating climate change. The UN Security Council has examined the impact of climate change on international peace and security since Climate change can threaten the stability of countries in a number of ways.
Related Global Tensions: Challenges and Opportunities in the World Economy
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