A growth rate of 5.5 percent for China “is a broadly healthy development,” Gruenwald said on Monday to CNBC’s “Squawk Box.”
The uncertainty around the trade relationship between the U.S. and China is dampening global growth,, says Paul Gruenwald, chief economist at S&P Global Ratings.
The Dec. 15 round of tariffs is going to be different because it will hit the consumers directly, and “that’s got a political element as well,” Gruenwald said.
Monday, Paul Gruenwald, chief economist at S&P Global Ratings, told CNBC that China’s slowing growth rate should not be a worry, but an unresolved trade war between the world’s two largest economies.
“We’ve argued for some time that China’s slowing from 7-8 percent back then to 5.5 percent is a broadly healthy development,” Gruenwald told CNBC’s “Squawk Box,” adding that China’s labor force is “either flat or shrinking,” so GDP per capita growth remains strong.
Nevertheless, the strained trade relationship puts a greater dent on global growth than the direct effects of the tariffs which he argued
He said that, “All the uncertainty around U.S.-China trade relationship is putting a damper on investments. You don’t know where the world’s two largest economies are going and what the investment environment is going to be,”
As the trade war intensifies, many American companies move supply chain logistics out of China and into the nations of Southeast Asia, namely Vietnam and the southern neighbor of the United States, Mexico.
But the reconfiguration of the supply chain between U.S. companies and Chinese manufacturers is not sufficiently significant to move “the macro data,” stated Gruenwald.
What affects investment sentiment and long-term business plans is that they are uncertain about how to execute their five-year strategy plans, he said, and that’s why companies dial back on spending.
Gruenwald said, “That overhang has been with us for a while now and we’ve been arguing that’s putting a damper on global growth,”
And if the two sides are unable to sign a deal by mid-December, there will be new U.S. levies on Chinese goods.
″The Dec. 15 round of tariffs, that one is going to be different because the first couple of rounds were in capital goods. So, the supplier can take a hit or somebody in the supply chain can take a hit, which push prices up a little bit,” he added.
“If it’s consumer goods, and all of a sudden the iPhone in your pocket is 15 or 20 percent higher, it’s directly affecting a consumer, that’s got a political element as well,”Gruenwald stated.
Generally, the economist said investors shouldn’t worry about China’s slowing rate of growth.
The biggest issue to think about is the continuing confusion over the U.S and China trade relationship which affects every economy as well as global growth, and the issue is unlikely to be resolved anytime soon.


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