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US and Europe in Trade War

US and Europe in Trade War 2

While the US and China continue to focus on the October 10 restart of trade talks to be held in Washington DC, the US now has renewed a battle with Europe. In what is called a ” win” for the US, the World Trade Organization (WTO) has granted the US the right to tax as much as $7.5 billion dollars of European exports annually. Of course European leadership is now saying that it will respond in kind, so this seems to be another global trade war that could have additional negative impact on global GDP growth.

Now, there are signs of a European slowdown measured in manufacturing and service industries. Both of these sector PMI releases showed slight weakness in September readings which suggests that external pressure from a trade war with the US could only make matters worse.

After an initial selloff, European stocks climbed back on Thursday. The troublesome conditions for risk assets continued as a host of economic releases on Thursday pointed to a slowdown in European growth. September Composite PMI, a measure of economic strength, and both German and French Service PMI reported weaker-than-expected releases with German PMI actual reporting at 51.4 versus a forecast of 52.5. French PMI reported 51.1 versus 51.6 forecast. Spain also reported lower figures.

So the US and Europe moving into a protracted trade war will likely have negative consequences for the global market.

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