ECB, at the last meeting, highlights risks from trade war

ECB, at the last meeting, highlights risks from trade war

FRANKFURT – When President Trump provoked a trade war for the first time, the fear in Europe was that the biggest influence would be psychological. The executives would be confused and they would postpone or cancel their expansion plans.

That seems to be exactly that: European factories are producing less goods, automobile exports are declining and surveys show business managers on the continent are nervous.

Soon, that will affect economic growth in the region. At least that's what the European Central Bank expects.

On Thursday, the Bank lowered its projections for economic growth in the 19-country euro-zone and warned that a possible escalation of the dispute – which threatens to hit the European car industry – could cause further headaches.

The French economy looks brighter. Unemployment in the eurozone is 8.2 percent lower than a decade ago. Wages in the common currency area are rising after years of meager growth.

But the list of risks is growing. The The economy of Turkey, an important trading partner, is slowing down and the country's central bank has had to increase Interest on Thursday strong. Talks with Great Britain on a friendly divorce with the European Union are deadlocked. And German auto exports slumped in July, probably because buyers are unsure of the trade war, analysts say.

Trade is the biggest concern for European companies. At the moment there is an uncomfortable cease-fire in trade between Europe and the US. Trump and Jean-Claude Juncker, European Commission President, agreed after a July meeting not to impose punitive tariffs on each other while trying to negotiate a comprehensive trade agreement.

But European political leaders and business managers are nervous that the American leader may become restive if the talks do not produce quick results – and probably not. The European Commission follows a methodological approach and inhibits the need to obtain the assent of its 28 Member States.

"There's really nothing the union can do to accelerate its trade decisions," said Mujtaba Rahman, managing director in London for the Eurasia Group, a political consulting firm.

United States tariffs for steel and aluminum imports remain, raising prices and disrupting complicated supply chains. The Department of Commerce continues to examine whether foreign-made cars pose a threat to national security, a process that creates the legal basis for the 25 percent tariff on car imports that Mr. Trump has threatened.

Mr. Trump seems to hope that people guess, but companies hate insecurity. As long as the Damocles sword of Trump tariffs hangs over the Eurozone, companies will be reluctant to buy new machines or expand their operations.

Follow Jack Ewing and Amie Tsang on Twitter: @JackEwingNYT and @ Amietsang,

Jack Ewing reported from Frankfurt and Amie Tsang from London.

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