ECB warns on trade tensions

By BLOOMBERG

BRUSSELS • The European Central Bank (ECB) warned that a rise in trade protectionism would undermine the global economy, and said the US would be among the worst-affected.

The cautionary comments coincide with data showing factory orders in Germany unexpectedly slid for a third month in March, another sign of the weakness that’s dogged the euro-area economy since the start of the year. Separate reports showed investor confidence in the currency bloc fell for a fourth month and a retail gauge suggested that sales contracted for the first time in more than a year.

The ECB has cited tariffs as one of its chief concerns as the institution’s policymakers edge toward the end of their stimulus programmes. President Mario Draghi has warned that while the impact of already-adopted protectionist measures is limited, the prospect alone of trade war between the US and China could damage confidence and reduce consumption and investment.

“In a scenario in which the US increases tariffs markedly on imported goods from all trading partners that retaliate symmetrically against it, the outcome for the world economy would be clearly negative,” ECB researcher Lucia Quaglietti wrote in an Economic Bulletin article published yesterday. “The impact could be particularly severe in the US.”

In the eurozone, an investor confidence index by Sentix fell to 19.2 — the lowest since February 2017 — from 19.6. A gauge of expectations is at its weakest since October 2014.

“Uncertainties about the introduction of punitive US tariffs and the danger that this could lead to an expansion of protectionist measures are weighing on us,” Sentix MD Manfred Hubner said.

IHS Markit’s retail purchasing managers index dropped to a 17-month low of 48.6. A number below 50 signals that sales shrank. Still, ECB officials haven’t shown signs of panic and are sticking to their view that growth isn’t under serious threat.