Global economic upswing knocked back by Trump’s trade-war threat

Investors are worried that Donald Trump will derail world growth.

An announcement last week of tariffs on imported steel and aluminum triggered a slide in optimism among financial-market participants, according to Sentix, which said the reaction should be a “wake-up call for the U.S. president to reconsider the matter of protectionism.” Investor confidence in the euro-area economy slid to the lowest level in almost a year.

“Trump’s comments on punitive tariffs give investors a great deal of thought — an economic turnaround is in the air!” said Manfred Huebner, managing director at Sentix.

	SURVEY	ACTUAL	PRIOR
Overall Index	30.9	24.0	31.9
Current Situation	—	45.8	49.5
Expectations	—	4.3	15.5

Governments around the world have condemned Trump’s plans and threatened retaliatory measures while warning that trade wars rarely produce winners. The conflict comes at a crucial time for the world economy, which seems to be at a crossroads toward more moderate growth, with factories from China to the euro area seeing slower activity recently.

The European Central Bank holds a policy meeting on Thursday. While some officials have already argued in favor of advancing down the exit route, President Mario Draghi has pushed back.

“These new economic question marks reduce the pressure on the ECB to tighten its monetary policy reins — something that Mario Draghi does not favor at the moment anyway,” Huebner said.

Report courtesy Bloomberg