Warning Of Damage Due To Trade War Signaled By Germany’s Growth Slump

An increase in protectionist rhetoric might just have started to get reflected already in first signs of damage to Europe’s economy amidst increasing trade tensions between the European Union and the United States.

A quarter on quarter growth of just 0.3% for the quarter ended March was reported by the largest economy of the Eu and a global export powerhouse – Germany. It had achieve double that rate in the previous quarter.

“It appears that with last year’s global trade surge fading and the specter of protectionism hanging over firms the German economy has passed its growth peak for now,” said Oliver Rakau, chief German economist at Oxford Economics.

However, a detailed breakdown of the of the performance of the German economy was not presented by the German statistics office and the data revealed as the quarterly GDP was just a preliminary estimate. But one of the factors was a “less dynamic” foreign trade, the department said.

About 50% of the total GDP of the country is accounted for by exports and therefore trade is he backbone of its economy. there is a huge trade surplus that Germany has with all of its trading partners and that has been a point of sore for United States President Donald Trump.

While threatening to impose tariffs on German cars into the U.S., Trump has repeatedly criticized the country for being “very bad on trade”.

However there has yet been no concrete trade policy against Germany despite the harsh rhetoric from Trump.

However, it appears that Germany’s growth has been dented by threats alone. There has been drop in factory output and investments have bene postponed and experts have warned of further worries in the future.

“If the US continues with its current approach and implements protectionist measures, Germany would be more at risk than most,” said Jack Allen, European economist at Capital Economics. “It is a more open economy than most EU countries, and it also exports more than most outside the EU.”

A rise in the euro has also hit German exporters by making German export more expensive in international markets. the highest point since 2014 was achieved by euro in February at $1.26.

There would be serious damage to the global economy by tariffs and other trade restrictions, the World Trade Organization warned last month. Trump and other world leaders were urged by it to “show restraint.”

Growth was being hurt by rising uncertainty between the trade relationship between the EU and the U.S. and the threat of enhanced trade restrictions, said Florian Hense, an economist at Berenberg Bank. However, there would be little economic impact of the  Trump tariffs on steel and aluminum., he said.

“The real risk stems from the uncertainty about the future trade regime, as shown by the serious damage Brexit has done to the UK already,” he added.

(Adapted from Money.CNN.com)

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Categories: Economy & Finance, Regulations & Legal, Strategy, Uncategorized

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