WSJ "De-globalization Also a Cause of Global Inflation"

[Photo by Reuters-Yonhap News]

[Asia Economy Reporter Park Byung-hee] While supply chain disruptions, labor shortages, and large-scale government fiscal spending are cited as major factors of global inflation, deglobalization is also another factor driving up prices, the Wall Street Journal (WSJ) analyzed on the 5th (local time).

The argument that globalization lowers prices has long been raised in academia. The logic was that lowering trade barriers leads companies to compete to import cheaper products, which in turn lowers prices.

Robert Johnson, an economics professor at the University of Notre Dame, and Diego Comin, an economics professor at Dartmouth College, stated in a joint report published last year that thanks to international trade, the US Consumer Price Index (CPI) inflation rate decreased by 0.1 to 0.4 percentage points annually from 1997 to 2018.

The globalization trend was halted by the 2008 global financial crisis, the United Kingdom's exit from the European Union (EU) in 2016, and trade disputes triggered by former US President Donald Trump.

According to Citigroup analysis, US household maintenance costs steadily declined after the 2008 financial crisis but rose when former President Trump began imposing tariffs on China in 2017. From 2017 to March 2020, household maintenance costs increased by 3%, and after the COVID-19 pandemic, they rose by an additional 8.5%. According to the United Nations Conference on Trade and Development (UNCTAD), the global foreign direct investment (FDI) volume reached a record high of $2 trillion (approximately 2,370 trillion KRW) in 2015 but decreased to $1.5 trillion in 2019.

Economists expect that inflation caused by deglobalization may continue, given that the Joe Biden administration has partially inherited the trade policies of the Trump administration.

The Biden administration ended tariff disputes with Europe but continues the trade war with China. In June, it banned imports of solar panels produced in China's Xinjiang Uyghur region. As a result, the price of polysilicon, a key raw material for solar panels, exceeded $20 per kilogram in the second quarter of this year. The price in the second quarter of last year was $6.20.

Gary Clyde Hufbauer, an economist at the Peterson Institute for International Economics, estimated, "If the trade policies of the Trump and Biden administrations continue, the US CPI inflation rate will rise by about 0.5 percentage points."

This content was produced with the assistance of AI translation services.