trade war latest publications
The recovery of growth in Latin America has not materialized for several quarters and the return to average growth rates above 2% has been consistently delayed. The second quarter of 2019 was no exception.
Last week China’s government announced its GDP figures in the second quarter as well as a batch of activities indicators in June such as industrial production, retail sales and fix-asset investment. These headline figures still look fine.
This report presents an analysis of those global shocks, most of low probability, which may have severe effects on the economy. The balance of risks continues to be tilted to the downside due to trade tensions (impact on China) and increasing probability of recession in the US.
In November 2018, just before the last meeting of the G20 state leaders in Buenos Aires, the focus was placed on whether a communiqué would be issued (there was no such communiqué for the previous G7 summit) and if the meeting between the leaders of the USA and China would avoid a trade war.
The European election results were less negative than feared by pro-European parties, but it is still too early to determine the changes that may come about in terms of economic policy. Currently, they are contributing to the aggravation of political problems in some countries.
The decision by the United States to increase the trade tariffs for China once again has brought the trade truce to a halt and fired up China’s tit-for-tat policy.
A batch of April economic indicators are announced today, together with previously released trade and credit data, suggesting that the risk of growth deceleration looms large even before the escalation of US-China trade war in early May.
At BBVA Research we estimate that a tariff increase to 25% could bring Chinese GDP down 0.5 pp from our base scenario, in which China grows by around 6% in 2019. The impact on the other two trading blocks will be less severe, around 0.2 pp in the United States and 0.1 pp in the eurozone.