US protectionism worries the ECB

Donald Trump's recent announcements of higher tariffs on steel and aluminum are causing concern to the European Central Bank. The banking institution has examined the possible consequences of increasing tensions on trade for the global economy.

US trade policy angst the economists of the European Central Bank (ECB). The increasing number of decisions on tariffs on steel and aluminum, and the one on the withdrawal of É the United States to Iran nuclear deal should not alleviate concerns that exist on the world trade scene. In its latest economic bulletin published on May 10, the European banking institution recalls that "the announcements of these last weeks relating to the customs duties represent a risk for the world dynamics."

"World trade indicators, albeit contrasting, have generally slowed somewhat at the beginning of the year , and geopolitical risks have driven up oil prices. "

In a recent interview with German television, Emmanuel Macron wanted to recall several principles.

"We have rules, those of the World Trade Organization , we must enforce and respect each other," insisted the French president. "I believe that Europe must be respected, we are a great power of international trade"

Trade liberalization: a slower pace

The pace of global trade liberalization has slowed in recent years as restrictive measures have increased in parallel, according to the above-mentioned bulletin. Economist Lucia Quaglietti recalls that the number of newly signed free trade agreements has declined sharply over the last decade, " even though recent agreements have more coverage in terms of countries involved and targeted sectors" . In addition, the evolution of tariff rates illustrates a slight recovery after the 2008 crisis, as suggested by World Bank data.

Finally, discriminatory measures in G20 countries have been steadily increasing since 2012. "Of these, the two main instruments used were anti-dumping and import tariffs, which account for about 30% of the total. set of measures applied in 2017 ". In the end, the slowing pace of trade reforms could be one of the factors that has weighed on the growth of trade according to the ECB.

Rebound of world trade

Despite this finding, global trade has rebounded recently. World imports increased by more than 5% in 2017, 1.4 percentage points above the 2011-2016 average. In a study published at the end of 2017, the World Trade Organization explained that during the period from October 2016 to October 2017, WTO members continued to "take more trade facilitation measures". trade restrictive measures ", a trend observed over the last four years. As a result, trade really accelerated between 2016 and 2017 in a context of global recovery.

Modest effects but risks

The consequences of Donald Trump's decisions on steel and aluminum tariffs are expected to be relatively limited. The tariffs announced concern only a very small share of US trade and world trade (0.5%). "Their effect will probably be modest,"says the ECB. On the other hand, the Frankfurt-based organization is much more skeptical about the future.

"Risks associated with escalating trade tensions and a broader reversal of globalization have clearly increased, which could affect investment decisions globally and severely strain the resilience of global trade dynamics. . "

The intensification of tensions over trade in goods and services "risks jeopardizing the current recovery in world trade and activity", say the experts. In the scenario of a global rise in tariffs on a global scale, price increases could increase the production costs of firms and lower the purchasing power of households. It could also "affect consumption, investment and employment, and rising trade tensions would fuel economic uncertainty, leading consumers to defer spending and companies to defer investment."

In its recent economic forecasts, the European Commission also warned of the risks to the business. According to the European Commissioner for Economic and Financial Affairs Pierre Moscovici, " the biggest risk to these optimistic prospects is protectionism ... it should not become the new normality, it would only harm those of our citizens we need to protect the most.