Tariffs can no longer mask broader economic weakness

Significance

Global economic activity is deteriorating widely. This is despite the fact that the US-China trade conflict is not escalating, China is loosening fiscal policy and the United States and euro-area are committing to looser monetary policy. On April 3 the Asian Development Bank reduced its 2019 growth forecast for developing Asia to 5.7%, down from 5.9% a year ago, and the WTO reduced its forecast for 2019 growth in global trade volumes to 2.6%, from 3.7% in September.

Impacts

• David Malpass became World Bank president this month and concerns will linger about his alignment with Trump’s ‘America First’ policies.
• If the US call to double the IMF’s ‘New arrangements to borrow’ passes, the debate over a permanent capital increase will be pushed back.
• A no-deal Brexit may push UK GDP into recession, hurting others as Germany, France and Spain’s UK exports sum 10 billion dollars or more.
• US-EU relations could deteriorate as the US trade body threatens billions of dollars of tariffs in retaliation for EU Airbus subsidies.