The economic impact of an escalating United States-China trade war, Brexit, a potential India-Pakistan conflict and the ongoing Qatar blockade is being felt around the world. With the headlines reporting conflict at every turn, it is perhaps unsurprising that global markets are uncertain.
We stand at an economic crossroads, one that could see the global economy falter and recover or plunge into chaos and a deep recession with far-reaching consequences.
Nine major economies are already on the verge of recession, including Germany, the United Kingdom, Russia, Singapore and Brazil, while some Wall Street experts are even warning that the U.S is facing elevated recession risks for doggedly pursuing its trade war with China.
As it stands, the International Monetary Fund (IMF) has warned that the trade war will affect China more than the U.S. if President Trump goes ahead with all the latest threatened tariffs, seeing Chinese worldwide output drop 1.6 percent for 2019, compared to a 0.9 percent drop in the U.S.
But the actions of both countries will also be felt around the wold. Bloomberg has warned that uncertainty could lower global GDP by 0.6 percent by 2021, knocking $585 billion off the International Monetary Fund’s estimated global GDP of $97 trillion.
Trade disputes are far from the only issues affecting the global economy today. Britain has taken another step closer to a no-deal Brexit from the European Union with Prime Minister Boris Johnson seeking the Queen’s approval to suspend parliament ahead of the Brexit deadline, seen as a pre-emptive strike against those trying to block a no-deal.
It means that if Britain fails to reach a divorce agreement with the EU by October 31, it will crash out on terms set by the World Trade Organization. The news shocked markets and saw a further drop in the value of the pound, which has lost around seven percent of its value since March.
Johnson will have an even more difficult time getting his way now that he has lost his majority in the House of Commons.
The ripple effect from Brexit would likely be felt far and wide, causing further volatility in global markets. It would hit EU countries that export to the UK under the current free-trade deal particularly hard.
The Middle East is not without pressing issues either. We are two years into the blockade of Qatar by its neighbors, some of the world’s wealthiest countries.
The war, fought via a land, sea and air embargo, is being staged by Saudi Arabia, the UAE, Bahrain and Egypt. It not only affects the world’s busiest shipping lanes but also nations that are vital to the global oil market, causing further instability.
Doha has proven itself capable of not just surviving, but thriving despite the blockade, building strong bilateral relations with countries beyond the region and absorbing the economic shock, as reported by the IMF. But the IMF has also warned that an escalation of the rift would begin to affect funding and growth in the region.
There are other challenges threatening global economies. America’s punishing sanctions and crackdown on Iranian oil exports have the potential to hit global oil prices, while India’s revocation of Kashmir’s special status in August has antagonized neighboring Pakistan, which has in turn made incendiary comments seen as inciting terrorism and further conflict.
Despite the dire headlines, there are still opportunities to bring the world back from the precipice. A trade agreement between the U.S. and China, dropping the Qatar blockade and a viable solution to Brexit are all possible and would have immediate and positive effects on the global economy.
But action needs to be taken, and soon, to calm nervous markets.
Ryan Patel is board director and a senior fellow at the Peter F. Drucker School of Management at Claremont Graduate University. Follow him on Twitter @RyanPatelGlobal.