ISLAMABAD: The Asia-Pacific Economic Update warns that the escalation of trade and geopolitical tensions poses a major near-term risk, and a tit-for-tat trade war will take a heavy toll on regional value chains with impacts on exports, employment and workers’ earnings.

The Economic Update released on Tuesday by the UN Economic and Social Commission for Asia and the Pacific points out that the recent imposition of tariffs by the European Union on Chinese electric vehicles, a new round of United States tariff hikes on Chinese goods this month, further deepening in China-US technological decoupling, and potential tariffs by Asian countries on low-price Chinese products all point to additional frictions and fragmentation in global trade.

The UN report says the upside risks to inflation remain as geopolitical tensions may again drive up food and energy prices and international shipping costs, and lead to prolonged transport disruptions. Weather events affecting agricultural harvests and withdrawals of price subsidies and cost-of-living support may also trigger higher inflation.

According to the report, the near-term outlook points to cautious optimism, as steady economic performance is expected in the second half of 2024, conditional on favourable developments in major advanced and Asia-Pacific economies.

Inflation in the region is also on track to ease further, allowing more accommodative monetary policy stances and price subsidy cuts to rebuild public finances.

Published in Dawn, August 21st, 2024