When the US Sneezes, the World Catches a Cold. What Happens When It Has Severe COVID-19?
During a blue-sky moment in 2018 near the end of a decade-long economic expansion, it was the United States that helped pull the world along as the extra cash from tax cuts and government spending flowed through…
During a blue-sky moment in 2018 near the end of a decade-long economic expansion, it was the United States that helped pull the world along as the extra cash from tax cuts and government spending flowed through domestic and global markets.
But if it was U.S. policy that pushed the world higher then, it is U.S. policy that threatens to pull the world under now as the country’s troubled response to the coronavirus pandemic emerges as a chief risk to any sustained global recovery.
Officials from Mexico to Japan are already on edge. Exports have taken a hit in Germany, and Canada looks south warily knowing that any further hit to U.S. growth will undoubtedly spill over.
“Globally there will be difficult months and years ahead and it is of particular concern that the number of COVID-19 cases is still rising,” the International Monetary Fund said in a review of the U.S. economy that cited “social unrest” due to rising poverty as one of the risks to economic growth.
“The risk ahead is that a large share of the U.S. population will have to contend with an important deterioration of living standards and significant economic hardship for several years. This, in turn, can further weaken demand and exacerbate longer-term headwinds to growth.”
It was a clinical description of a grim set of facts: After the U.S. government committed roughly $3 trillion to support the economy through a round of restrictions on activity imposed to curb the virus in April and May, the disease is surging in the United States to record levels just as those support programs are due to expire. More than 3.6 million people have been infected and 140,000 killed. Daily growth in cases has tripled to more than 70,000 since mid-May, and the 7-day moving average of deaths, after falling steadily from April to July, has turned higher.
Meanwhile the country has fractured over issues like mask-wearing that in other parts of the world were adopted readily as a matter of common courtesy. With some key states like Texas and California now reimposing restrictions, analysts have already noted a possible plateau to the U.S. recovery with the country still 13.3 million jobs shy of the number in February.
A GLOBAL DISAPPOINTMENT
For other major economic powers, that is a weight added to their own struggles with the virus and the economic fallout.