The global economy could be hit by a second wave of damage from the US-China trade war—and it will be much more severe than the first, Indonesian Finance Minister Sri Mulyani Indrawati said.
The outlook for global growth already was cut amid the dispute between the world’s two biggest economies, but the escalation in hostilities since then has “created a point of no return,” Indrawati said in an interview Tuesday. Damage from this second wave “is not quantifiable at this moment” but will be significant, and could thrust the world into “a totally uncertain era.”
“No one now has the trust or belief about how international disputes must and should be settled,” Indrawati said. “I think this secondary damage is going to be much, much more long lasting beyond a certain political regime.”
Since the International Monetary Fund cut its global growth forecast in July, tensions between the US and China have ratcheted up and a deal appears more distant. Volatile markets, together with the brittle state of the world economy and new flashpoints such as Hong Kong, have fed fears of a global recession.
“This is something that needs to be addressed globally by all the leaders, regardless of their short-term interests,” Indrawati said. A coordinated policy response as seen during the global financial crisis a decade ago would help counter the current threat, she said, but right now “it seems like the world is heading in a direction that nobody wants.”
“The policy action is not coherent,” she added. “That’s creating very weak confidence among many economic players in the world in the ability of leaders or decision-makers to actually avert or avoid this recession.”
Image credits: Muhammad Fadli/Bloomberg