Expect the effect of the ‘Kaskade’ tariff in slowing down the global economy, the official warning of the United Nations
The main arm of the UN organization that focuses on trade and development, UNCTAD, said that President Trump’s tariff policy had created new costs and disruption in the global supply chain, and for less developed countries that trade with the US, the worst economic falling has not hit.
“We have seen disturbances in the global supply chain,” said Rebeca Grynspan, Secretary General of UNCTAD. “Many CEOs sit and wait, because if there is no predictability, and what you need for trade and investment is predictability and trust,” he added.
Earlier this year, UNCTAD released data showing global investment back at the era level of the financial crisis. The UN arm also estimates that half of the percentage points that will be shaved from this year’s global growth.
“We are worried that the high level of uncertainty will paralyze business decisions, which have an impact on trade, resulting in trading revised downwards,” Grynspan said about the decline in global GDP estimates by 2.3%, down from 2.8%. “This is a lot,” he said. “This is much lower than the growth we experienced in the last decade.”
US consumer inflation increased in June, a surge caused by a higher price in consumer goods imported from foreign countries, although Trump’s administration said the tariff did not cause inflation.
Vietnam, Cambodia, and Malaysia, three Asian countries that benefit from the “China Plus One” supply chain strategy that sees more manufacturing moves to these countries, see the impact when supply chains shift again, said Grynspan. Trump has threatened to add a 40% tariff to all goods that use what is known as transshipment, with a product trip begins in China but then moved to countries like Vietnam to avoid Chinese tariffs.
The tariff laying will cause the most economic pain for the countries that are most unwilling globally, according to UN officials, with a combination of existing tariffs and the threat of Trump tariffs that results in a buildup of trade taxes that can cause export reduction of more than 50%. “This is a cascade,” he said.
“This will affect the work, and that will affect stability in many countries, where even growth will be lower than the average in the world,” Grynspan said. “If you take the most developed countries in the world, 46 of the most vulnerable countries, we project that their exports can be affected, as much as 54% down, if the tariff is imposed on them,” he added.
Cambodian exports to the US represent more than 10% of its GDP, according to the global development center. The tariff charged by Trump’s administration can delete more than $ 4.5 billion in Cambodian exports over the next four years, with clothing and goods that suffer the biggest blow, according to the Databheel research company, with increasing risk of economic and social stability of Cambodia.
Grynspan said that meanwhile it was a good sign that Trump’s government wanted to negotiate a trade agreement, this agreement was complicated and needed time to complete it, and the current uncertainty had an impact on economic and investment growth.
At the same time, other inflation challenges for the global supply chain have increased again, with the increase in Houthi aggression against ship vessels in the Red Sea. Two ships were attacked in recent weeks, resulting in the sinking of one container.
“This Choke point is very important (to be traded),” said Grynspan. “When they are disturbed, the whole system suffers.”
He said the latest attack in the Red Sea raised a war premium in sea insurance by 1% above the value of the ship, or as much as $ 1 million. Adding fuel costs as a result of sea operators that cross a longer route to avoid the red sea adding inflationary pressure. He said the red sea situation alone could add 0.6% to the global price.
Source: CNBC
