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Friday, February 28, 2020

Corporate Commentary

The Impact Of Political Uncertainty On The Global Economic Market

When seeing the headlines on the news, many of us think about how this will affect you directly, but what about the ways that elements such as this will affect the weekly food shop and even trade agreements for your business? In this article, we will be providing you with insight into just how much political uncertainty can impact the global economic market as a whole.

The USA and China Trade Deal 

As the ongoing trade war between the USA and China shows no sign of any resolution, the US and China are meeting yet again to discuss a resolution. However, at a meeting on the 2nd December 2019, Trump stated that a China deal could wait until after 2020 in order to get the best possible deal for the United States. However, with this came a shock to a number of investors with the stocks sliding with the news of no deadline in sight. With the FTSE 100 stock slumping over 81 points to a low of 7,203 points making this the lowest level in almost two weeks.

Mounting Tensions With North Korea 

Another element of political uncertainty that has affected the global economic market is the mounting tensions between North Korea and the American Government. With a relationship that has been anything but smooth sailing, Trump and Kim Jong Un have a number of meetings to discuss the relationship between the two nations. However, this in itself has been anything but smooth. With tensions reaching their peak in 2017 with an exchange of fire threatened, this is a relationship that has threated to disrupt the global market a number of times. Whether these are imposed tariffs on imported goods or even the price of oil, this can all be raised at any moment should the two nations begin to disagree.

The Brexit Effect 

The third and final major political upset that is causing disruption to the global economic market is the ongoing issue of Brexit. As the UK works towards their next deadline of leaving the EU, a divided nation heads to the polls on December 12th to decide who they would like to run their country. Though there has been a vast amount of political uncertainty in the UK there has in fact been an increase in bounce rate for the economy as there was an increase of 0.7 percent in the first three months of August. Though there are still a number of uncertainties surrounding Brexit such as the leave agreement and trade laws that will e affected following Britain’s exit from the European Union.

The Impact On International Trading 

As these political issues continue to hit the headlines, many of us forget about the economic impact that they can have, particularly on the nation’s businesses. Not only is there a likelihood that trading will be interrupted but there is also the possibility of tariffs affecting the overall costs of importing goods. This is an issue that is already present in the United States as a 15% tariff has already been placed on a number of products in Apple’s catalogue. Though this did not leave much of a dent in Apple’s monthly revenue this is set to change on December 15th as it is set to be a 15% import levy on the products.

Apple is not the only one being affected by this however as this will impact a number of other tech companies as import levies begin to rise. This can have a lasting impact on international trade as a number of countries that are close to the United States in terms of trade have recorded a higher than average amount of trade uncertainty. This is then added to the ongoing political uncertainty in the United Kingdom as this is causing a number of huge businesses to consider moving their headquarters as a result.

The Rise Of Social Trading Platforms 

In the midst of all this political uncertainty, it is common for the price of gold and other commodities to rise as these are investments that do not lose their worth during political unrest. However, due to the decentralized nature of these digital currencies, they continue to thrive during political uncertainty. With a constant circulation of currency and a number of CopyTrader options from industry leaders such as Etoro, the number of users reached over 10 million. This saw the number of features including  CopyPortfolios in 2016 that allow those that wish, to see some of the top investors on the platform and replicate their success. In addition to this, the implementation of such technology also allowed users to take advantage of pre-determined marketing strategies to mimic the success of the top traders. This style of technology subsequently led to an increase in similar technologies as well as the expansion of the Etoro platform to cater to the growing popularity of online currencies.

The Impact On International Business 

In addition to the impact of international trading, there is also the pressing issue of the impact that this will have on international business. With a number of companies affected by major political unrest and the economic hits leading to wavering annual income, this can lead to a wide amount of hesitance when it comes to investing.

Additionally, there is a vast amount of unrest when looking into the headquarter locations for a number of large corporations as political unrest can lead to some business pulling out and moving elsewhere. This is, therefore, damaging to the economy in that country as there will be less spending. This has been seen already following the Brexit vote as a number of factories across the board have begun to close down with thousands of jobs falling through. In addition to this, a number of leading retailers such as John Lewis and Sainsburys have also said that their business may be affected as the prices are set to increase, therefore presenting problems for the running costs of a business.

The Future Of The Global Economic Market

Though the future of the economic market continues to chop and change with every event that unfolds it is looking promising for the UK following their exit from the European Union as the pound is set to slowly increase in price over the years. Though some reports say that this is only a small increase to what the economy would have been, this is a promising future for the global economic market.

However, with an end to the China and US trade war looking as though it may still rumble on until after the 2020 election, this still a pressing issue as a number of major businesses may be hesitant to invest in the first place.

With this in mind, there are a number of ways that political uncertainty can affect the global economic market, whether it is an increase in commodities or the overall price increase on imported goods, this can all affect business in the long term.


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Alexandra Dimitropoulou
Deputy executive editor at the ​CEOWORLD magazine. Writer, internet person, professional restaurant recommender, and native New Yorker. Passions: health & wellness, coffee, running & dogs.
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