POST TIME: 7 July, 2018 00:00 00 AM
Carney warns on trade war fallout on global growth

Carney warns on trade war fallout on global growth

A global trade war at risk of escalating may already be slowing world economic growth, Bank of England governor Mark Carney warned in a speech on Thursday, reports AFP from London.

Carney spoke as the US was Friday set to begin enforcing tariffs on more than $34 billion (29 billion euros) in Chinese imports.

“There are some tentative signs that this more hostile and uncertain trading environment may be dampening activity,” Carney said in a speech titled From Protectionism to Prosperity delivered in Newcastle, northeastern England.

“For example, survey measures of global export orders and manufacturing output have fallen back from highs at the start of this year,” added Canadian national Carney, whose own country is embroiled in a cross-border trade war with the US.

The BoE in addition forecast that further escalation in the trade war, or ten-percentage point rise in tariffs between the US and all of its trading partners could erase 2.5 percent off US output and one percent off global economic output.

“Protectionism affects the real economy through three channels,” Carney said.

“There are direct effects, through reduced trade flows, disrupted supply chains and higher import costs. And there are indirect effects, via business and consumer confidence and financial conditions.

“If implemented, the tariffs announced thus far (between the US and China, the US and EU, and the US and its NAFTA partners, as well as the potential US tariffs on EU motor vehicles and parts), will broadly double average bilateral tariff rates, and could raise average US tariffs to rates not seen in over 50 years,” Carney argued.

But in what appeared to be an olive branch to US President Donald Trump as the EU battles to dissuade him from imposing hefty levies on European cars, German Chancellor Angela Merkel on Thursday said she would support possible talks with trading partners on lowering automobile tariffs.

Trump on Sunday charged that Europe is “possibly as bad as China” on trade, as he reiterated that he is mulling import taxes of 20 percent on EU cars, after having already imposed punitive duties on steel and aluminium.

The EU has slapped tariffs on iconic US products including bourbon, jeans and Harley-Davidson motorcycles, as a symbolic tit-for-tat response to the metal duties.

Canada has meanwhile hit back at the United States with retaliatory tariffs on American summertime essentials including Florida orange juice, ketchup and Kentucky bourbon, in an opening salvo in a North American trade war with Trump.

And Beijing has vowed to respond to Trump’s looming action, with its own tariffs on US goods as soon as Friday, arguing it has “no choice but to fight” and accusing Washington of “opening fire on the whole world” with the trade restrictions.

Not to be outdone, Washington has threatened to

introduce even steeper US counter-measures, potentially covering another $400 billion in Chinese goods.