The global economy has been in turmoil in recent days. Stock markets are down, and governments are discussing how to respond to the tariffs the United States imposed last week.
Radar Armenia spoke to economist Suren Parsyan on the topic.
- What impact could the new US tariff policy have on the global economy?
- In general, imposing tariffs aims to protect domestic producers and provide additional revenue to the state budget. Of course, the goal is also for producers and investors from around the world to move their money to the US and contribute to the growth of the US economy. Trump's policy is not new; he has always talked about it and advocated for it during his election campaign and is trying to bring it to life. Its consequences can be positive and negative for the American economy and global economic processes. This will initially lead to additional uncertainty, to which the stock exchanges will respond by reducing the exchange rate of securities. It will also begin a process of some depreciation of the dollar since it is likely that we will have a specific inflationary situation in the first stage, considering that many of these goods are not produced by the American economy. For example, bananas are not made in America and will be tariffed. People's living standards will become more expensive in the short term. In the long term, the calculation is that additional jobs and investments will compensate for these inflationary pressures and bring specific regulations.
- What similar situations have occurred in the world economy, and what were the outcomes?
- The American government also made such an attempt in the past during the Great Depression; in particular, in 1925, the American government again imposed high tariffs to protect its economy from imported goods, but it did not succeed. The opposite effect occurred: inflation occurred, a boycott of American goods began worldwide, and the American crisis deepened. Suppose the American side is complaining that Europe, China, Canada, and other countries export more to the US than they import from the US. In that case, those imports will decrease even more, considering that a particular public outcry and boycott may begin. There are significant uncertainties, and under these conditions, there can be many different outcomes: inflation, economic growth, and even a further reduction in exports.
- What impact will all this have on the Armenian economy?
- A 10% customs duty has been imposed on Armenian goods. This may significantly impact the re-export of diamonds to the US, which may decrease. Of course, it is still early to assess, considering that it remains to be seen how much the prices of diamonds exported from other countries will increase. For example, if the cost of diamonds imported from India increases by 24%, ours by 10%, ours will have better competitive advantages than India's. It will be difficult for us to raise prices. Our exports may suffer. Armenia did not increase customs duties for the US; it could not do so since we are in the EAEU field.
- Could there be a fall in the exchange rate?
- The fall in the exchange rate is expected, considering the indicators of the decline in the American securities market. The dollar may become cheaper shortly. It is difficult to say to what extent since the American economy and the economic factors of individual countries influence the American exchange rate. For example, for comparison, the dollar exchange rate is falling worldwide, but it is rising in Iran because there is a demand for dollars in the Iranian economy.
