After all, a glimmer of hope: The United States and China signed a first partial contract on Wednesday to overcome their trade dispute and thus averted the danger of a new global economic crisis for the time being. The one and a half hour celebration in the White House was not the big hype hoped for by President Donald Trump because his Chinese counterpart Xi Jinping preferred to stay away from the ceremony. However, Trump took the opportunity to put in the spotlight the negotiator who, in his view, deserves the most applause anyway: he himself. He even quoted a journalist from his favorite broadcaster Fox News, who recently named him the best US president of all time. China's Vice Prime Minister Liu He, on the other hand, had to stand next to Trump for more than an hour before he was allowed to speak.
Under the terms of the agreement, the United States will reduce part of its existing punitive tariffs to Chinese goods deliveries, and the People's Republic will in turn large-scale purchase of agricultural products, industrial products and energy sources in the United States and open up to US financial services. Trump described the agreement as "the biggest deal the world has ever seen". The deal would bring "well over $ 200 billion" in additional revenue to the US economy over a two-year period. However, it remained unclear whether the number was a commitment from China or just a target. The President also stressed that the People's Republic would better protect patents and intellectual property from American companies, no longer force them to divulge technological knowledge, and take more stringent action against the manufacture of counterfeit goods.
The agreement on the so-called "phase one" agreement had been a relief worldwide in December because the conflict between the two major powers had become the greatest threat to global economic development. In Germany, the dispute – along with other factors – ensured that the economy grew by just 0.6 percent last year. That was the weakest increase in six years and not even half of the value from 2018 when the plus was still at 1.5 percent.
However, the American-Chinese dispute has not been resolved with the current partial agreement. On the contrary: Negotiations on the actual core of the dispute are only just beginning. Among other things, this will be an attempt by the Beijing leadership to use massive state subsidies as well as theft of ideas and product piracy to shape their country past the USA into the number one global economic power.
President Xi has so far rejected all calls to stop the subsidy program to develop future key technologies. Obviously, nobody knows where a compromise line could lie in this race for the top position without one of the participants reducing his ambitions. After all, Trump held out the prospect of the abolition of all US punitive tariffs for the first time if both sides agree on a "phase two" agreement.
Until then, however, there is a long way to go – and that is also the reason why the Swiss World Economic Forum (WEF) – the foundation that will once again host the eponymous meeting of politicians and managers in the Davos ski resort next week – will make a flaming appeal on Wednesday addressed to the international community: Given the many geopolitical turmoil and the increasing economic isolation in parts of the world, cooperation is the only way to reduce social tensions and secure sustainable growth, it says in the new "World Risk Report", which the WEF under the heading "The Burning Planet" in London. Otherwise there are "catastrophic" consequences, as economic conflicts and political polarization continue to increase.
German economy is divided into two
While the trade dispute represents the greatest economic risk in the short term from the perspective of the experts and managers surveyed, in the long term climate change poses the greatest risks. For the first time in its history, the WEF identifies five ecological questions as the greatest risks for the world – from floods, storms and earthquakes, to the loss of biodiversity and the collapse of the ecosystem, to the failure of all effective climate protection efforts. 90 percent of those under the age of 40 expect heat waves and health problems to increase this year.
One of the main sufferers of short-term economic risks is the extremely export-dependent Federal Republic. With mini growth of just 0.6 percent, Germany is also lagging behind Europe-wide: Both the euro zone and the entire European Union grew more than twice as much in 2019. After all, the recession feared in the summer has so far failed to materialize.
The German economy is divided into two. On the one hand, the industry is being hit by the weakness in international demand, which, for example, triggers US punitive tariffs. The slump in production in the auto industry alone, which also has to struggle with the switch to electric mobility, reduced German growth in 2019 by 0.75 percentage points, according to the Ifo Institute. On the other hand, there is consumption, which is surprisingly stable. This continues the paradigm shift in Germany: Instead of exports, growth drivers are now government spending, private consumption and services, especially communication, financing and hospitality. In addition, there is the construction sector, which benefits from the monetary policy of the European Central Bank with its low interest rates.
This year things look a little better for the German economy. However, global development is likely to continue to weigh on the economy. Great Britain, the second largest economic power, is leaving the EU, something that German companies are also feeling. The Iran conflict is at least temporarily driving up the oil price. "German industry will continue to struggle," said Torsten Schmidt from the Essen economic research institute RWI. "The risk remains that this weakness will spread to consumption and the labor market." The RWI expects 1.1 percent growth in 2020. Nevertheless, the unemployment rate is expected to shrink slightly. The RWI, like many other institutes, does not expect a real economic recovery until 2021.
A full debate about what the Federal Government can do for the economy should trigger the full public coffers. The state floats in the money: the federal government, the federal states, municipalities and social security funds generated a surplus of around 50 billion euros in 2019. The federal government alone recorded an increase of 19 billion euros, including unused reserves, as reported by the Federal Statistical Office. It was 13 billion for the federal states and 11 billion for social security.
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