Introduction to the Economic Crisis
The expected economic crisis, often referred to as the "Trump recession," did not occur last year, despite warnings that the Trump administration’s aggressive tariffs would trigger a surge in inflation and a global economic downturn. This has left many economists and financial experts wondering why the predicted crisis did not materialize.
The Impact of Tariffs
When the United States announced its unilateral protectionist policy in April of last year, financial markets plummeted, and the Volatility Index (VIX), which reflects stock investors’ anxiety, soared to its highest level. Tariffs are a direct burden on importers, increase production costs, and drive up prices, making it seem inevitable that such measures would deal a fatal blow to the real economy. However, the U.S. economy continued to grow rapidly, with the gross domestic product (GDP) posting an annualized growth rate of 4.3% in the third quarter of last year, and the consumer price index (CPI) standing at around 2.7% as of December.
Reasons for the Delayed Crisis
There are several reasons why the expected crisis did not occur. Firstly, Trump’s tariff policy did not ultimately reach the levels initially announced. The original plan was unrealistic, and U.S. trading partners chose negotiation over retaliation. Companies also absorbed more of the tariff burden themselves than expected, and stockpiling inventory before tariffs took effect and diversifying import sources likely helped as well. Additionally, artificial intelligence may be playing a role in the current vitality of the global economy, with investment concentrated in AI.
The Possibility of a Future Crisis
Just because there was no crisis last year does not mean the possibility of a crisis has disappeared. It is possible that the full effects of the tariffs have yet to manifest in the market. Most professional research institutions forecast that the global economy will maintain a similar growth trajectory this year as it did last year. However, there are many variables, including the direction of AI evolution, U.S. tariff policy, and changes in U.S.-China relations, which are difficult to predict.
Catastrophe Theory
Catastrophe theory highlights how even very small changes can suddenly trigger dramatic shifts in circumstances. Nothing happens until something happens, and actual change is only observed after a critical threshold is crossed. This theory can be applied to the current economic situation, where the causes of change are accumulating, but actual change has not yet been observed.
Expectations for the Future
Many expect that the Korean economy will fare somewhat better than last year, and that the U.S. economy will maintain a stable growth path thanks to expanded investment in artificial intelligence and improved productivity. However, the sharp decline in confidence in U.S. Treasury bonds is a potential threat to global financial markets. Fiscal deficits in major countries, including the United States, have already exceeded sustainable levels.
Conclusion
In conclusion, while the expected economic crisis did not occur last year, the possibility of a future crisis still exists. The global economy is complex and influenced by many variables, making it difficult to predict what will happen in the future. However, by understanding the reasons for the delayed crisis and the principles of catastrophe theory, we can better prepare for potential changes in the economy. It is essential to continue monitoring the economic situation and to be aware of the potential risks and threats to the global financial markets.
