China, North American trade deals cut risks of recession, says Fed
AMERICA's China trade deal, plus the free trade pact with Mexico and Canada has 'helped reduce downside risks and buoys business sentiment,' said the US Federal Reserve minutes from the January 28-29 policy meeting
24 February 2020 - 19:00
Fed officials said the risk of a US recession in the next year has 'fallen notably', according to the minutes, reported Agence France-Presse.
The US central bankers were 'cautiously optimistic' the easing of tensions would 'boost business confidence or raise export demand which would help strengthen or at least stabilise business investment'.
But uncertainty over trade policy 'is likely to remain elevated, with the possibility remaining of the emergence of new tensions as well as the re-escalation of existing tensions,' according to the minutes,
US central bankers also noted that the China deal 'would still leave a large portion of the tariffs in place and that many firms had already been making production and supply chain adjustments'.
Trade confrontations have included tariffs on steel and aluminum, on top of hundreds of products from China, drawing retaliation against US products and fuelling a decline in American manufacturing last year.
With the China deal, Washington cancelled a damaging round of new US tariffs on US$160 billion in imports that were due to start in mid-December, and promised to slash in half the 15 per cent tariffs on $120 billion of consumer goods like clothing imposed September 1.
But the average US tariff on China over the course of the trade war surged from three per cent at the beginning of 2018 to more than 19 per cent, according to economists.
The International Monetary Fund (IMF) warned trade conflicts and tariffs cut eight-tenths off world growth, and said the truce with China could 'reduce the drag' by 0.2 per cent.
The US central bank cut the benchmark lending rates three times last year in an effort to buoy the economy as it was shaken by US multi-front trade wars.
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