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On 10th Jan 2018,

The World Bank forecasts 2018 growth to be at 3%, following above-expectations performances in 2017

"For the first time since the global financial crisis, all major regions of the world are experiencing an uptick in economic growth," 

The bank cited this improvement in conditions due to increased capital investment and stronger global demand, with developing and emerging economies carrying world growth, with these economies on average growing at 4.5%.

For economies such as Australia, an improvement in commodity prices has lead to stronger growth prospects.

However, in many economies, mainly advanced, the structural changes occurring to the labour force, resulting in ‘declining potential’.

Many economies will experience an increase in retirees as the baby boomer generation heads into retirement

This will decrease labour supply and the size of the labour force, as well as decreasing prodcutivty

This will result in a smaller income tax base as well as a need fro greater welfare payments to retirees.

"More than 84 per cent of global GDP is currently produced by countries whose working age population shares are expected to shrink by 2030."

The world bank recommends investment into human capital, such as higher quality education, and other forms of infrastructure to made the labour force more productive to offset the decrease in size.

Furthermore, gender equality in the workforce can also add to the size of the labour force, which can increase the productivity of the labour. 

Global female labour force participation, at 58 per cent on average in 2013-17, remains three-quarters below that of men... and even less in [emerging market and developing economies]."

On 20th April 2018

The IMF has upwardly revised global growth predictions from 3.8 % to 2.9% , due to "favourable market sentiment, accommodative financial conditions, and the domestic and international repercussions of expansionary fiscal policy in the United States"

The main contributers to upward revisions on the forecasts are from US and the Europe region. The US are expected to grow 2.9% in 2018 and 2.7% in 2019, upwardly revised by 0.6% and 0.8% respectively, and Europe at 2.4% in 2018 and 2.0% in 2019, up by 0.5 and 0.3  respectively.

This reflects the impact of expansionary fiscal policy in stimulating the economy, which is more successful in expansionary measures.

China is expected to grow at 6.6% in 2018 and India at 7.4%, with the ASEAN at 5.3%.  This is reflective of the high growth rates of emerging economies

This upward trend is expected to reach it;s highest levels since the GFC slowdown since 2010-11, and the various recessions since then

Due to increased consumer confidence in more positive economic conditions, resulting in increased global trade volumes

This is compounded by the structural changes in many economies, as the many populations are ageing, resulting in changes to the labour force and increased welfare programs

The IMF warns against possible drag factors, including:

a possibly sharp tightening of financial conditions, waning popular support for global economic integration, growing trade tensions and risks of a shift toward protectionist policies, and geopolitical strains

On 15th June 2018

A trade war occurs when one country imposes tariffs on imports, causing the other to respond, and escalates, moving the countries away from free trade.

In theory, by taxing another country’s imports, it will give local firms a competitive advantage as local goods will be cheaper for consumers.

This will reduce imports leakages, boosting the economy of the original country

Trump has imposed a 25% tariff on $USD 50 bil worth of Chinese exports, ranging from white goods to mechanical equipment.  China has responded with its own tariffs on $35 bil worth of US goods

Trump has imposed the tarriffs due to perceptions of the unfair trade balance between the two nations, with the US-China’s trade deficit at $375 bil in 2017. He also accuses China of Intellectual Property (IP) theft, where less stringent IP laws allows more loophole for Chinese firms to copy US designs and ideas.

China does in fact engage in protectionist policies that can be considered IP theft

By imposing government censorship on international digital companies, such as Google and Facebook, it eliminates these foreign competition from the Chinese market, which have caused platforms such as Weibo to grow

While this is not a traditional protection policy, it has nerveless eliminated foreign competition and is a deterrent to free trade.

However, this trade deficit number does not include the US’s net services exports, which totalled $242.7 bil in 2017.

Like most advanced economies in present day, the US is undergoing structural change, shifting it’s composition where 90% of the economy consists of services

Main area of the US’s services include: banking, financial services, tourism

One of the tariffs imposed is 25% on all steel imports, and 10% on aluminium. However, most of the US steel is sourced from its traditional allies, such as Canada and the EU

Steel and aluminium prices rise in the US because of reduced international supply

Greater demand for local steel will push up the price for steel and aluminium, lifting profits for steel makers. 

However this will have flow on effects to other manufacturing sectors of the economy, such as the automobile industry

This will result in the extra costs pushed onto consumers, which will cause cost inflation.

While in theory the additional revenue from higher prices should allow for increased labour demand in the US, the nature of the trade war has forced companies to reconsider their production choices

Harley-Davidson, an US motorcycle company, has relocated its production services out of the US into Europe and South America in order to avoid the tariffs on automobiles imposed by the EU

This has resulted in the closing down of US factories, leading to loss of jobs for workers inside those factories

On 4 July 2018

The current in instability of the Chinese financial markets, is an indication of the deepening slowdown in the Chinese economy, reflected by the plunging of the CNY by 5 per cent since mid-June, has resulted in a large outflow of foreign capital from China.

... currency crisis three years ago. That episode pushed capital flight to $US100 billion ($136 billion) a month. The PBOC burned through $US1 trillion of foreign reserves... It became the catalyst for a worldwide equity slump and came close to pushing the global economy into recession, a warning that events in China are no longer a local affair.

In light of the proposed trade wars, it will worsen the slump of the global economy currently, as higher tariffs deter exporters, resulting in changes to a free-floating exchange rate due to changes in currency demand.

This will decrease the exchange rate for a country, which can have flow-on effects to other sectors, such as investment and interest repayments

Leverage stock purchases consists now to five trillion CNY, similar to the levels of 3 years ago

In light of the trade war, if China is to use currency as a weapon against the US, it will see an increase in the outflow of capital from China

This can be seen as both establishing and investors will wish to avoid extreme levels of risk as the restructuring of the Chinese economy will change to become more focused based through lower exchange rates, thereby reducing profit margins from manufacturing. 

The greater danger is that the Fed continues to ratchet up interest rates and pushes the dollar higher. "The stronger the dollar, the more difficult for China. It tightens global financial conditions," said Geoffrey Yu from UBS

The Fed has been tightening monetary policy up until Jan 2016

By increasing the US cash rate, this attracts more foreign investors into the US, creating demand for the USD, ans thus increasing the price of the USD

On 29th May 2018

https://www.smh.com.au/business/the-economy/time-to-stop-multinationals-eroding-our-tax-base-seek-founder-20180521-p4zgmb.html

Above is a very similar article, which engages the same issue

Through the process of globalisation, it has allowed TNCs to more easily operate in Australia, being especially true for tech and net companies due to the lack of a physical location of these services.

Many websites gain profits from showing advertisements, where the profits are then diverted offshore. As with many multinationals, by diverting profits offshore, they do not pay the Australian company tax, creating leakages from both the Current Account and Taxation

However, as tech companies do not occupy a physical presence, and are active globally, it it difficult to determine under which country’s laws will profits need to be taxed under, and can also lead to difficulties as countries will dispute who collects the tax, and the possibility of the same profits being taxed multiple times.

This therefore becomes increasing important for international organisations such as the OECD, G20 and the WTO to implement global taxation guidelines for these companies, as the tech sector will continue to grow as the world becomes increasingly digitaliised. 

Currently, many countries cannot reach a consensus on how tax rates should be applied, in both OECD and G20 discussions

One proposal is a 3% tax on all advertising revenue from "globally significant enterprises" with annual turnovers of more than $1 billion.

On 26th June 2018 

Trumponomics' tarriffs has started to take effect, as the US has now started to impose tarrifs on key European and Chinese exports

In response, both areas has committed to continue to support free trade as the US adopts protectionist policies.

Europe has imposed tariffs on $US3.3 billion ($4.5 billion) worth of American products on Friday in response to US barriers on imports of aluminium and steel.

This could potentially harm Australian exports given the composition our our export base

However as the US only constitutes 5% of net exports, this is will not directly effect Australian exports, but rather the sustainability of China to purchase out exports

"The US is due to impose tariffs on $US34 billion of Chinese imports from July 6, and Trump has threatened to impose levies on another $US200 billion of Chinese goods."

Trump has introduced these tariffs as he has felt that America takes up an unfair burden of trade. The US currently imported more than it exports against these other major economies

The introduction of tariffs are a way for Trump to establish a form of protection for the United States

This is predominantly to protect US workers from competitive advantages from the global stage, especially in manufacturing sector

The global response to the tarifs has been reflected in the lowest level of world trade since 2015, according to the Dutch Bureau for Economic Policy Analysis, in stark contrast to the 7 year high reached at the beginning of 2018.

The slowdown is a reflection of the loss of confidence as a clash between the 2 largest economies has the most influence on global trade

As most globalised economies will trade with either of these nations, they could lose international competitiveness

On 2nd July 2018

In June, the Renminbi (RMB) fell by 3.3% against the USD, marking it as one the of steepest falls since China established it's pegged exchange rate.

There is speculation that the float had been dirtied as in the closing days of the month, the RMB stabalized again, however, in the face of the trade wars, China can use the value of it's currency to combat the effects of potential tarrifs.

Given the currently undervalued state of the RMB, this gave China a cost advantage in the global market as their goods were cheaper to foreign buyers

By allowing the value of the RMB to fall, it can bring the RMB to a more realistic representation of market demand 

This will allow the price of US imports to become cheaper as the USD : RMB heads closer to a 1:1 conversion, which can also lessen the value of imposed US tarriffs on Chinese exports

Currently, China imports $US 130 billion of goods from the US,  while the US imports  $450 billion from China, leaing to a trade imbalance of $280 bil USD.

To minimise the negative impacts if a trade war does occur, the Chinese government has started implementing policies to reduce risk in the financial market, 

“[The trade war] is occurring against the backdrop of China’s continuing attempts to reduce the excessive levels of leverage in its economy and financial system ... China had been tightening credit. There were signs of a slowing of economic growth as the authorities sought to reduce the level of financial risk within their system.”

By reducing risk in the system, the government is also tightening the stock markets. There is an counterargument that the fall in the RMB reflects problems in the Chinese economy itself, as the Shanghai stock exchange fell by 7.5 percentage points. 

“Bloomberg has estimated there are more than $US770 billion of Chinese shares pledged as collateral for loans”

If stocks still fall, it could raise alarms as this situation is similar to the US housing crisis, where the use of property as collateral for loans led to a devaluing of a the housing market, eventually leading to the GFC.

Therefore, by tightening financial markets, the Chinese government can be seen in attmepting to ensure their external stability

“They would be mindful of the potential for too-abrupt a decline in the value of the renminbi to trigger a surge of capital outflows, further tightening liquidity in their system, and would be weighing that risk against the potential to soften the impact of the tariffs”.

Another argument arises that the RMB fell against other TWI currencies, while the USD appreciated, which would be reflective of weaker global economic growth.