WASHINGTON • 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 US policy that pushed the world higher then, it is US 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 Japan, and Canada looks south warily knowing that any further hit to US 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 (IMF) said in a review of the US 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 US 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 US government committed roughly US$3 trillion (S$4.2 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 US to record levels, just as those support programmes are due to expire.
More than 3.8 million people have been infected and 143,000 killed.
Daily growth in cases has tripled to more than 70,000 since mid-May, and the seven-day moving average of deaths, after falling steadily from April to earlier this month, has turned higher.
Meanwhile, the country has fractured over issues, including mask-wearing that in other parts of the world was adopted readily as a matter of common courtesy.
With some key states including Texas and California now reimposing restrictions, analysts have already noted a possible plateau to the US 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.
The US economy accounts for about a quarter of world gross domestic product (GDP).
Though much of that is service-related, and much of the direct impact of the virus is tied up in industries like restaurants with weak links to the global economy, the connections are still there.
A lost job leads to lower consumer spending, which leads to fewer imports.
Weak business conditions lead to less investment in the equipment or supplies that are often produced elsewhere.
Year-to-date US imports through May are down more than 13 per cent, or roughly US$176 billion.
In Germany, whose measures to contain the pandemic are considered to have been among the most effective, exports to the US plunged 36 per cent year on year in May.
Analysts see little prospect for improvement, with year-to-date US auto sales through last month down nearly 24 per cent from a year earlier.
"That is really a disappointment," said Professor Gabriel Felbermayr, president of the Kiel Institute for the World Economy, in a recent interview with Deutschlandfunk.
The spike in US infections, he said, could not have been expected.
In Japan, the speed of the economy's recovery is seen tied directly to US success in stemming the virus.
Yesterday, Japan's Ministry of Finance reported that exports plunged at a double-digit pace for the fourth month in a row in June, backing signs that the pandemic has knocked the economy into its worst post-war recession and raising the spectre of a longer and more painful global downturn.
US-bound Japanese shipments nearly halved again due to plummeting demand for cars and auto parts, while exports to China remained weak, pointing to the absence of a strong growth engine for the world economy.
Ministry of Finance data showed Japan's exports dived 26.2 per cent last month from a year earlier, bigger than a 24.9 per cent decline forecast by economists.
Dai-ichi Life Research Institute chief economist Hideo Kumano said: "Japan's recovery will be really delayed if the spreading of the coronavirus in the United States isn't stopped and US-bound exports from various Asian countries don't grow."
PESSIMISM AT BOTH BORDERS
The IMF projected US GDP will shrink this year by 6.6 per cent, in line with many analysts' projections.
The Bank of Canada (BOC) is more pessimistic, forecasting US GDP to fall 8.1 per cent on the year. That has already been lowered once as the pandemic worsened.
A further leg down would hit Canada directly, with perhaps three-fourths of the country's exports headed over the US border.
BOC governor Tiff Macklem said: "We did take down our US projection... I would underline that there's a lot of uncertainty, and the principal source of the uncertainty is the evolution of the coronavirus itself."
Mexico is also posting record daily numbers of new cases, but President Andres Manuel Lopez Obrador has at times deflected criticism of his government's efforts by pointing to the US numbers.
He undertook a risky visit with President Donald Trump earlier this month, couching his journey to Washington as a matter of economic necessity as Mexico attempts to revive an economy that could shrink by 10 per cent or more this year, according to forecasts.
He hopes the new United States-Mexico-Canada Agreement, which took effect on July 1, will spur business and investment, but pessimism has been growing.
"To the point that people in the US are losing jobs or incomes, it is a downward weight... and it will have ramifications on the ability to consume globally," said senior economist Elizabeth Crofoot of the Conference Board, which documented a record drop in global consumer confidence in a recent survey.
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