The latest report by the German Institute for Economic Research (IFO) predicts that the U.S. administration's additional 10% tax on China's exports to the U.S. totaling $300 billion, which will begin to be applied as of Sept. 1, will result in a 1.5 billion euros ($1.6 billion) worth of additional export revenue to the European Union and 3.8 billion euros to other countries.
On the other hand, it is expected that China will lose 24.8 billion euros in exports to the U.S. with these additional taxes. On paper, even though the U.S. is expected to earn 1.8 billion euros in additional customs duties with these added taxes, the fact that U.S. imposes an additional tax on these products imported from China at a good price will also bring an inflation risk to the U.S.
The same risk applies to Britain if it ends up with a "no-deal" separation with the EU due to Brexit. Thus Turkey, which has shown initiative in order to raise its trade with the U.S. to $100 billion and who is seeking consensus to have a possible free trade agreement with Britain prior to Brexit, should remind both Britain and the U.S. that the solution to the inflationary effect that will arise due to their steps goes though Turkish export products. For the products that Turkey exports at competitive prices and with high quality, in addition to the manufacturing industry, if Turkey can attain global standards in agricultural products and food exports, these would bring an additional income of $5 billion to $10 billion in the first instance.
China, while making it very clear that it is bothered by it being named a currency manipulator, if it imposes an additional 10% tax on U.S. products as retaliation for the additional taxes the Trump Administration will impose from Sept. 1, its losses could be reduced to 21.6 billion euros. On the other hand, the IFO's report states that the U.S.' additional $1.8 billion in revenue will evaporate and turn into a $1.5 billion loss. This situation indicates that an ecosystem is being formed where Turkey can use all the available opportunities to gain export volume from the increasingly hardening trade wars. Therefore, learning from the South Korean example, Turkey should focus on a win-win outcome based on free trade agreements (FTAs) instead of FTAs that would help the country's exports.
Turkey, in the coming period, should accelerate the opportunities from the trade and technology wars between the world's leading powers and reports that would evaluate these opportunities that would multiply exports by establishing research units based on economic intelligence. Following a methodology based on the "Strategic Mind," if we can turn Eurasia into a substantial market with the export of services, in addition to the export of goods, we can reach exports of goods and services exceeding $500 billion in 2030.
Global economic outlook deteriorating
In addition to this, while talking about the Munich-based IFO's report, we should also touch upon the results of the World Economic Survey (WES) on the third quarter of the year run by the institute with the participation of 1,173 experts from 116 countries. The finding of the institute, which conducts the survey in question each quarter, is that the index, which was minus 2.4 points in the second quarter of 2019, would fall by another 7.7 points in the third quarter and reach minus 10.1 points.
The IFO has described this decline in the index as a state of affairs where the "global economic outlook has deteriorated." While the economic situation and expectations considerably diminished the indices, the increase in trade disputes is also significantly damaging the world economy. Clemens Fuest, the president of the IFO, said that the climate of the world economy has deteriorated in all regions, emphasizing that experts are evaluating the situation of developed countries and the developing and emerging economies of Asia and revising their expectations downwards.
Fuest, who stated that the experts who participated in the institute's survey expected much weaker growth in global trade, pointed out that the expectations of the experts who participated have reached their lowest level since the start of last year's trade conflicts. Experts also expect weaker private consumption, lower investment and a decline in short-term and long-term interest rates.
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