Business World

Saturday 22 September 2018

ECB warns US will be biggest loser in trade war as Eurozone mood darkens

Business sentiment is slipping in euro-area economies in the backdrop of soured relations between Trump and China. Photo: Reuters
Business sentiment is slipping in euro-area economies in the backdrop of soured relations between Trump and China. Photo: Reuters

Alessandro Speciale, Fergal O’Brien and Piotr Skolimowski

The European Central Bank (ECB) has warned that a rise in trade protectionism would undermine the global economy, and said the US would be among the worst-affected.

The comments coincide with data showing factory orders in Germany unexpectedly slid for a third month in March, another sign of the weakness that's dogged the euro-area this year.

Separate reports showed investor confidence in the currency bloc fell for a fourth month and a retail gauge suggested that sales contracted for the first time in more than a year.

The ECB has cited tariffs as one of its chief concerns as policymakers edge toward the end of their stimulus programmes.

President Mario Draghi has warned that while the impact of already-adopted protectionist measures is limited, the prospect alone of trade war between the US and China, as Donald Trump rails against a trade deficit, could damage confidence and reduce consumption and investment.

"In a scenario in which the US increases tariffs markedly on imported goods from all trading partners that retaliate symmetrically against it, the outcome for the world economy would be clearly negative," ECB researcher Lucia Quaglietti wrote yesterday.

"The impact could be particularly severe in the US."

In the eurozone, an investor confidence index by Sentix fell to 19.2 - the lowest since February 2017 - from 19.6. A gauge of expectations is at its weakest since October 2014. IHS Markit's retail purchasing managers index dropped to a 17-month low of 48.6.

A number below 50 signals that sales shrank. Meanwhile, German factory orders slid 0.9pc in March, compared with a median estimate for a 0.5pc increase. They've now dropped for three straight months for the first time since 2015. Export orders slid 2.6pc. (Bloomberg)

Irish Independent

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