Global warming, global trade means floods in China will likely harm U.S. economy

"Economic losses might be down-streamed along the global trade and supply network affecting other economies on a global scale," said researcher Sven Willner.
By Brooks Hays  |  May 29, 2018 at 12:43 PM
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May 28 (UPI) -- New research suggests climate change is likely to cause more frequent and more destructive flooding in China, triggering economic losses at home and abroad -- including the U.S. economy.

"Climate change will increase flood risks already in the next two decades -- and this is not only a problem for millions of people but also for economies worldwide," Anders Levermann, researcher at the Potsdam Institute for Climate Impact Research in Germany, said in a news release.

Levermann and his colleagues modeled flooding risk in China and its effects on the economies of China's trade partners.

"Through supply shortages, changes in demand and associated price signals, economic losses might be down-streamed along the global trade and supply network affecting other economies on a global scale -- we were surprised about the size of this rather worrying effect," said Potsdam researcher Sven Willner.

The researchers' models used algorithms designed to measure global risk assessment for natural hazards, as well as algorithms inspired by network theory. Together, the model's components helped scientists understand how localized economic shocks propagate in time and space.

The simulations, detailed in the journal Nature Climate Change, provided a reminder that natural disasters can impact the entire global community.

China could suffer as much as $380 billion in economic losses due to flooding over the next 20 years. Such losses would likely trigger direct and indirect economic losses in the United States. The new models suggest increased flooding in China will cause direct losses of $30 billion and indirect losses of $170 billion over the 20 years.

Europe is likely to suffer more modest losses due to their more balanced trade relationship with China, the models showed.

"The U.S. imports much more from China than it exports to this country," Willner said. "This leaves the U.S. more susceptible to climate-related risks of economic losses passed down along the global supply and trade chain."

While the globalized nature of the economy ensures local impacts are felt around the world, it also allows supply chains to readjust, buffering economies against more dramatic losses. These buffering benefits offered by the globalized economy are most fully realized by countries engaging in balanced trade.

According to the new study, President Trump's plans to subject more Chinese imports to tariffs could make the United States more vulnerable to climate-related economic shocks.

"As our study suggests, under climate change, the more reasonable strategy is a well-balanced economic connectivity, because it allows to compensate economic damages from unexpected weather events -- of which we expect more in the future," said Levermann.

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