Outside In | Why US-China decoupling is a dangerous mistake and tantamount to self-harm

The World Bank expects Covid-19 to impact commodities like oil and platinum, and even the Opec cartel itself

Its report shows how central China is to commodity trade, and why the US would inflict more harm on itself by decoupling

Reading Time:4 minutes

An employee wearing a mask checks the temperatures of customers outside an Apple store in Shanghai. In the event that the US continues to press forward with extensive decoupling, the likelihood is that it will inflict more harm on itself, its manufacturers and its own consumers than anyone else. Photo: Bloomberg

Published: 3:00am, 2 May 2020Updated: 3:28am, 2 May 2020

Over recent weeks, as we obsess daily about the unfolding of the Covid-19 pandemic worldwide and its economic impact, a series of reports from the world’s leading multilateral agencies have shed valuable light on the short-term and long-term implications. None of them make comfortable reading.

As the United States, Germany and Spain have reported horrendous collapses in gross domestic product, so the International Monetary Fund has wrenched downwards its 2020 global economic forecast – to a contraction of 3 per cent. The World Trade Organisation is expecting a crash in global trade of up to 32 per cent.

The UN’s World Food Programme foresees a further 135 million people facing starvation, mainly in Africa, the Middle East and Asia. The International Labour Organisation has come up with some hard, miserable numbers on global job losses.

Last week, the World Bank joined this symphony of distress with its half-yearly Commodity Markets Outlook, warning that “the impact of Covid-19 has already been larger than most previous events and may lead to long-term shifts in global commodity demand and supply”.

In many ways, this 90-page report simply brings together in one place the fragmented stories we have already been reading over the past month: oil prices crashing as surface and air transport judders to a halt worldwide; food supply chains in disarray all the way from farm to fork; metal prices oscillating violently, in particular around the car industry; even Kenya’s flower exports are down by 80 per cent as air cargo services are disrupted.

But the report does more than aggregate hard numbers. It reflects on the awesome impact of Covid-19, compared with other recessions and disease outbreaks over the past 70 years; on the perhaps unique opportunity to eliminate climate-harming fossil fuel subsidies; and on the self-harm that would arise from export or import controls.

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.css-1m2rp1p{color:#34b8b5;}Outside In | Why US-China decoupling is a dangerous mistake and tantamount to self-harm

Outside In | Why US-China decoupling is a dangerous mistake and tantamount to self-harm