MOSCOW (Pakistan Point News / Sputnik - 03rd August, 2020) After going through one of sharpest economic declines in the country's history in second quarter of 2020, the United States may have its traditional trading partners, such as the European Union and China, suffer from a spillover effect, experts told Sputnik.
Last week, the US Commerce Department said that the country's economy had shrank at its fastest pace in history in the second quarter of this year, contracting by 32.9 percent. The decline came close to the average drop of 34.7 percent forecast by economists polled by US media. In the first quarter, the US GDP fell by 5 percent. Even so, the second quarter slump was the worst ever since the department began keeping quarterly GDP records.
The second quarter performance was directly related to the nation's response to the COVID-19, which resulted in "stay-at-home" orders and business lockdowns between March and April, that were only lifted in stages between May and June, according to the Commerce Department.
LONG-LASTING RECESSION OR A TEMPORARY CRISIS?
As in the last years the US has been engaged in heated trade disputes with China and other countries, it may redefine its approach towards trading partners in order to overcome the economic crisis, Randall Germain, a professor of political science at the Ottawa-based Carleton University, told Sputnik.
"American economic disruption will most definitely affect its traditional trading partners. This is inevitable. The more interesting question is whether the way in which America digs itself out of its pandemic recession will affect its trading patterns with other countries. This is a bigger but also a more difficult question to answer, at least until November 6," Germain said.
Michael Parkin, a professor emeritus with the University of Western Ontario, agrees that the sharp decline of the US GDP will have a negative effect on its trade partners, noting that "it is a global phenomenon, we swim or sink together."
The domino effect is already seen in the European Union, a major US trading partner, which saw a 14.4 percent year-on-year decrease in the second quarter of the year, which is the sharpest decline since 1995, Eurostat said on Friday.
Even though Washington has experienced a much bigger downturn, it is a global trend sparked by the pandemic, according to Germain.
"I do not think the economic contraction experienced by the American economy is means anything more than it means for every other economy that has suffered a similar fate. The pandemic-engendered restrictions on economic transactions have had similar effects around the world. What is different in the United States is that as a government they have the capacity to respond much more robustly and coherently, but due to their current political gridlock this has not happened. I do not think this is an illustration of geopolitical decline, but rather simply a case of political dysfunction, which is perhaps more temporary and 'fixable'," the Carleton University professor said.
The pace of economic recovery for the United States will now depend on how quickly the global community would come up with a vaccine against COVID-19.
"If vaccine becomes available for 2021 there will be a quick but incomplete recovery. With no vaccine, there will be a Great Covid-19 Depression that is more severe and long-lasting than the 1930s Great Depression. No one can say which outcome will occur and no one can attach probabilities," Parkin said.
For now, the sharp economic decline will definitely have "a tremendous negative effect" on US President Donald Trump's chances of re-election in November presidential vote, Marc Lavoie, a professor of economics with the University of Ottawa, told Sputnik.
