Amundi : Cross Asset Investment Strategy - September 2019

Trade war escalation and impact on world trade and economic growth

Alessia Berardi, Deputy Head of Macroeconomic Research

Trade tensions re-escalated during the summer. Starting on 1 September, the US Administration introduced new tariffs and China retaliated simultaneously. More tariffs are likely from the US side, including an increase in tariffs already in place from 25% to 30% and new tariffs on the last tranche of imported goods from China. Concerning extra-tariffs measures, in August the temporary licences granted to US companies to operate with Huawei were extended upon their expiration but, so far, with no additional structural guidance. On a more positive note, a new round of high-level talks in Washington has been confirmed by early October. As a consequence of the latest developments, we have again revised our global trade forecasts downward for the second half of 2019 and 2020 with a clearly negative impact on global economic performance, in particular in those economies that are most open and most integrated with China. Overall, central banks worldwide have increased their dovishness incrementally to offset the shock to trade and poorer domestic economic conditions. On top of that, more fiscal stimulus should come.