Tariff war could derail global recovery: ECB

Frankfurt (Reuters): Protective tariffs imposed by the United States in recent months have only had a minor impact on the world economy, but a significant escalation in tensions could derail the recovery in global trade, the European Central Bank said yesterday.

Retaliation and a fully-fledged trade war could increase import prices, raise production costs and eat into households’ purchasing power, negatively impacting consumption, investment and employment, the ECB said in an economic bulletin article.

Demanding more fair trade, the US has imposed some trade tariffs on China and asked Beijing to reduce its trade surplus with the US by EUR 200 billion, but it has so far exempted the European Union from new tariffs on steel and aluminium.

“In response to higher uncertainty, financial investors could also reduce their exposure to equities, reduce credit supply and require a higher compensation for risk,” the ECB said. “Heightened uncertainty could spill over more broadly, adding to volatility in global financial markets.”

Over the longer term, protectionism would weigh on productivity and negatively affect the economy’s potential output growth, the ECB said.

US protectionism may lead to rising global trade friction: China

BEIJING (Reuters): China’s commerce ministry said on Monday US unilateralism and protectionism may lead to an escalation of global trade friction and could derail the pace of global economic recovery.

China does not deliberately pursue a trade surplus, the Ministry of Commerce said in a report that summarises China’s past foreign trade situations, while calling for joint efforts between the United States and China to resolve trade disputes.

Good fundamentals of China’s foreign trade remain unchanged in the long run but it also faces problems including rising costs, the ministry said.