Economics
Chief economist update: EUr next

Just when we're just a handshake away from a Sino-US trade deal, another war on trade this way comes.

US President Donald Trump must be wringing his hands at how he succeeded in making China kowtow - er, compromise - to his demands.

Trump's now trained his crosshairs on the European Union (EU). Factset reports: "USTR proposed list of European products it will hit with tariffs in retaliation for $11 billion worth of damage from EU subsidies to Airbus that WTO has found cause "adverse effects" to US. List includes passenger helicopters, various cheeses and wines, ski suits and certain motorcycles. Threatened tariffs would be implemented only after WTO gave final approval this summer."

It started with a tweet.

On 9 April 2019, @realDonaldTrump tweeted: "The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put tariffs on $11 billion of EU products! The EU has taken advantage of the U.S. on trade for many years. It will soon stop!"

Make no mistake, this is not an empty threat. Trump will follow through.

The Sino-US trade war escalated the same way - via Twitter - when on 18 September 2018, Trump tweeted.

"China has been taking advantage of the United States on Trade for many years. They also know that I am the one that knows how to stop it."

If there's one thing Trump's stopped, it's the global growth momentum.

For at the same time that news broke about Trump's planned "tour of duty" to the EU, the International Monetary Fund (IMF) released its "World Economic Outlook, April" report which shaved the global GDP growth outlook to 3.3% this year - down from 3.5% predicted only three months ago and 3.7% forecast in the October WEO report.

The IMF "projects a slowdown in growth in 2019 for 70% of the world economy ... It reflects negative revisions for several major economies including the euro area, Latin America, the United States, the United Kingdom, Canada, and Australia".

No surprises but the IMF nominated the US-China trade tensions - along with "macroeconomic stress in Argentina and Turkey, disruptions to the auto sector in Germany, and financial tightening alongside the normalisation of monetary policy in the larger advanced economies" - as the major factors behind the slowing in global growth and its latest downgrade.

The IMF sees improved prospects for the global economy in the second half of 2019 and rightly so, for this is about the time the lagged effects of the U-turn and/or greater accommodation in monetary policies start filtering through into the world's respective domestic economies.

Still, the IMF sees many downside risks, stating: "Tensions in trade policy could flare up again and play out in other areas (such as the auto industry), with large disruptions to global supply chains. Growth in systemic economies such as the euro area and China may surprise on the downside, and the risks surrounding Brexit remain heightened. A deterioration in market sentiment could rapidly tighten financing conditions in an environment of large private and public sector debt in many countries, including sovereign-bank doom loop risks."

Well, IMF tensions in trade policy are flaring up again.

Read more: IMFDonald TrumpInternational Monetary FundWorld Trade Organization
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