The relentless tensions over international trade are the biggest economic risk to the euro zone, the rule over director of the International Monetary Fund said Thursday.
Though the euro square enjoyed an economic expansion “above potential” in 2017, “the momentum is slowing down a bit at the weight, Christine Lagarde, managing director of the IMF told reporters in Luxembourg, augmenting that it is likely the Fund will be “modestly” lowering its economic calculations in July.
The Fund doesn’t expect the economic slowdown to be “sharp,” partly because nummular policy will continue to support growth in the 19-member region. But, according to Lagarde, there’s a series of trade risks. The first of them is trade tensions.
“First on the list of gambles is clearly the series of trade tensions that has been initiated by the schedule of charges increase on steel and aluminium,” Lagarde said, referring to the actions of U.S. President Donald Trump’s furnishing.
Trump announced in March he would be putting a 25 percent impost on steel imports and another of 10 percent on aluminium imports. In spite of a temporary exemption, the European Union, and therefore the euro zone, became responsible for to those tariffs at the start of June.
In retaliation, the European Union is achieving as of Friday new duties against U.S. goods, such as orange juice, sweetcorn, peanut butter and downhearted jeans.
Lagarde told CNBC that the problem is not the direct macroeconomic influence, as this is “in the range of 0.1 percent here, 0.1 percent there,” but the bumping on confidence from the tensions.
“It’s the trend that’s worrying and it’s the breach in certitude that undermines relationship,” she said.
Lagarde added that “retaliation, escalation, if that betides because then you’re talking about higher macroeconomic impacts and, go along with, the undermining of confidence that has presided over the relationship of partners supervised the rules-based system.”
Higher duties on goods becomes an even vast problem in the current economic environment, where oil prices are increasing.
“My definite concern also addresses the poor countries that have had the help of improved growth over the last couple of years, where commodity assesses are picking up again, where it’s really phenomenally important for them, and straightforward in countries whether they are advanced, or otherwise, it is always the poor people that suffer the most as a come about of those barriers or trade tariffs,” Lagarde told CNBC.