July 15, 2019

European Economy Feels Strain From Trump’s Trade War

The tariffs that Mr. Trump imposed on European steel and aluminum don’t amount to a lot of money, relatively speaking. They hit European exports worth about $8 billion annually, a substantial sum to be sure, but not enough to knock the economy off course.

So far, corporate profits have not collapsed, but they are not growing very much, either. BMW reported a 6 percent decline in quarterly profit Thursday, which it attributed mostly to increased spending on new technologies like autonomous driving. Siemens said profit from April through June fell 14 percent, in part because of a slowdown in the United States auto market.

Gauges of the mood among European businesses, however, show a clear negative trend, one that could have an outsize impact on the regional economy. And if Europe’s economy suffers, so will the United States’. Despite all the hostile rhetoric, the European Union and United States remain each other’s biggest trading partner.

“In the hard facts, hardly anything has changed,” said Carsten Brzeski, chief economist for Germany and Austria at ING Bank. Rather, he said, trade tensions are “a cloud of uncertainty hanging over” Europe.

For example, a survey published Thursday by the Ifo Institute, a Munich-based think tank, showed increasing gloominess among economists who work for European banks, companies, research institutes and government institutions.

American businesses are worried, too. A closely watched barometer of sentiment among United States managers dipped to a 12-month low Thursday. Concern about tariffs is “an overwhelming concern,” the Institute for Supply Management, which conducted the survey, said Thursday.

There are other forces at work, as well, that are weighing on European growth, such as a stronger euro, which makes products manufactured in the eurozone more expensive in markets abroad.

Article source: https://www.nytimes.com/2018/08/02/business/economy/europe-trade-trump-tariffs.html?partner=rss&emc=rss

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