US overlooks risks to its economy from trade dispute

US officials have long been boasting of robust economic growth and a bullish stock market, which they cite as clear advantages over a slowing Chinese economy in a trade war that continues to escalate, but things might not be as optimistic as they suggest.

US officials might have grossly overlooked risks to their economy and misjudged the Chinese economy, experts said.

The US economy, which has seen a decade of robust expansion following the global financial crisis, might lose steam soon as several growth-boosting factors have reached unsustainable levels. Also, trade wars the US has launched with multiple countries could trigger a correction and bring consequential changes to the American economy that will last beyond this administration, analysts noted.

“It hasn’t been discussed as much. But there are many signs that the US economy could face some serious trouble in the medium to long term,” Liu Xuezhi, an economist at Bank of Communications, told the Global Times on Thursday. “It is just unsustainable for such a massive, developed economy to grow at this pace.”

In the latest sign, despite a strengthening US dollar boosted by domestic monetary tightening and chaos in certain emerging markets, capital flows back to the US slowed significantly in the second quarter.

In the quarter, US companies repatriated $169.5 billion from foreign earnings back to the US compared with $294.9 billion in the previous quarter, financial news website yicai.com reported on Thursday, citing data from the US Department of Commerce.

That represents a rebuke to the US administration, which implemented a massive corporate tax cut last year that aims to encourage US companies to bring back capital and invest in the country, the report noted.

While the US economy is expected to grow fast this year, economists and investors are starting to worry about next year and beyond.

A Reuters poll showed that economists believe the US economy will grow at an annualized pace of 3.1 percent in the third quarter, then slow to 2.8 percent in the fourth quarter and further to 2 percent by the end of 2019.

Also, in a survey conducted by Bank of America, nearly half of the investors said they believed the US economy will slow, and one in four investors said they were bracing for slower growth in the global economy over the next year, according to CNBC.

“The US economy has been growing solidly because of massive stimulus measures following the 2008 financial crisis and loose monetary policy. But these measures are unsustainable for the long term,” Liu said, adding that the trade war with China could hit US consumers directly at a critical moment in the US economy.

While US officials have brushed aside suggestions that the trade war will weigh on US consumers, economists agreed that the escalating war would hurt the US economy.

Liu pointed out that the trade war poses a serious uncertainty for companies and hinders their ability to make long-term investment plans. Companies must focus on how to weather the trade war and repair damaged supply chains, not to mention the direct damage of Chinese retaliatory tariffs on US goods.

“If companies can’t make long-term decisions and the global supply chain the US has relied on is disrupted, then the impact on the US economy would be very consequential and lasting.”