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Donald Trump’s trade wars could scupper the euro-zone’s fragile economic recovery. That’s the last thing both sides need
- Supportive ECB policies and green-shoot growth in several European economies, as Germany successfully avoided a recession, are good news for the market. But the US threat of tariffs on French goods could portend an escalation of tensions
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Why you can trust SCMP
There has been much focus on the pitfalls of the US-China trade war, yet the threat of increasing trade tensions between the US and Europe could be a bigger potential worry for global markets.
Forget US President Donald Trump’s headline-grabbing threat to slap 100 per cent tariffs on champagne, cheese and French luxury handbags in retaliation for France’s digital services tax, which is expected to affect US tech giants such as Google, Apple, Facebook and Amazon.
If the US and Europe go head to head and global growth takes another hit, there could be serious consequences for China. It’s the last thing global investors need right now. They need hope and encouragement looking ahead to 2020, not more dismay.
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The 17-month trade dispute is clearly taking its toll. China is feeling the pinch, judging by the latest trade data, showing exports down 1.1 per cent in November, for a fourth consecutive monthly decline. The positive takeaway is that more domestic stimulus steps will now be needed so Beijing can help steer the growth rate into a more secure range above 6 per cent next year.
For this to happen, China needs forward-looking, targeted and effective policies to keep global risks at bay and ensure domestic demand stays underpinned. It will require even looser monetary and fiscal policies, which will keep investors positive for the time being.
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