Indirect effects of the trade war affect Europe and Canada

As part of the latest move in the trade-war between US and China, both countries have introduced another round of tariffs. Economists at S&P Global Ratings have analysed the economic impact if the new tariffs remain in place until the end of 2019. Their findings are outlined in the report “The U.S.-China Trade War: The Global Economic Fallout”.

On the one hand, the short-term economic impact on the US and Chinese economy is likely to be minimal as long as household and business confidence remains strong. The likelihood of a rate cut by the United States’ Federal Reserve has increased as an insurance against an economic downturn. For China, a critical risk is weaker manufacturing investment as a result of investment restrictions, export controls, and tariffs.

In trade-dependent economies like Europe and Canada, the impact of the trade-war will be felt in sectors with medium to high technological content like transport equipment, motor vehicles, rubber and plastics, chemical products, and pharmaceuticals. Further indirect effects could be more detrimental.

The full report, written by Jon Maguire, in collaboration with Beth Ann Bovino (U.S. Chief Economist), Shaun Roache (Asia-Pacific Chief Economist) and Sylvain Broyer (EMEA Chief Economist) all from S&P Global Ratings can be found here.