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Abu Dhabi, UAESunday 16 December 2018

Ongoing trade tensions to prevail in 2019, says Fitch Solutions

Competition and trade issues remain unresolved as end of the year approaches

Ongoing trade tensions between the US and China, and other issues, will dominate the political agenda in 2019, says Fitch Solutions. Reuters
Ongoing trade tensions between the US and China, and other issues, will dominate the political agenda in 2019, says Fitch Solutions. Reuters

Global trade uncertainty will dominate the political agenda next year, with the US-China trade row, Brexit, the impact of sanctions on Iran, and leadership changes within the European Union the key issues for debate, according to a new report published on Tuesday.

“Overall, we are still in the midst of a transition to a more multi-polar world order, one in which the US, China, Russia, and to a lesser extent the EU and Japan are the most powerful actors, but in which emerging powers such as India, Iran, Saudi Arabia, Turkey and Brazil are increasingly important players” said Fitch Solutions in a report.

First, US-China relations are likely to remain tense in 2019, even after President Donald Trump and his Chinese counterpart Xi Jinping reached a 90-day truce over trade tensions at the G20 summit last weekend. Once the 90 days expire, the Trump administration could still escalate trade tariffs next year, bringing the risk of further Chinese retaliation and US counter moves, the report noted.

Areas of unresolved trade tension between the two superpowers include alleged intellectual property theft by China, lack of market access for the US in China and Chinese state control of commerce and industry, according to Fitch.

“We expect China will be very reluctant to rein in any core components of its long-term development plans around its Made in China 2025 [economic development] programme, and thus a compromise leading to a long-term truce will likely remain elusive,” the report said.

Meanwhile, the UK remains on course to leave the EU in March and its future relationship with Brussels is unclear. The UK government will likely be forced into a climb-down that results in a “soft Brexit in name only”, where the country remains closely tied to the EU by way of some form of customs arrangement, with single market freedoms retained.

“In any eventuality, the UK political landscape will remain deeply divided,” the report said. “The divisions between those supportive of and opposed to Brexit is unlikely to dissipate over the coming years. This will lead to an increasingly fractious policy environment, as the two major political parties struggle to maintain a sense of internal unity.”

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The EU parliamentary elections in May 2019 will reveal levels of support for anti-EU parties, it added. The EU will need to decide how best to protect its interests against President Trump’s trade protectionist impulses, Russia’s rising assertiveness in Eastern Europe, and the escalating budget dispute with Italy.

In addition to these destabilising global factors, Iran faces a challenging 2019 with deteriorating economic conditions due to the re-imposition of US sanctions in November.

“An anticipated economic recession and rising unemployment are likely to lead to more anti-government protests, although these are unlikely to destabilise the regime,” the report said.

Global commerce must also navigate the risks of doing business with Iran in an era of renewed sanctions.