Globe—Trade tensions sap growth

Indicators of economic and trade growth continue to plateau as US-China trade tensions show little sign of slowing down. Tariffs on US$200b of Chinese goods have increased to 25% from 10%, with China increasing duties on US$60b of US goods to 25% on June 1. President Trump and President Xi both signalled a recommencement of trade negotiations at the recent G-20 summit. The lack of clear direction is weighing on global sentiment with the International Monetary Fund (IMF) revising 2019 economic growth down from 3.9% to 3.3% (Chart).

The difficult trade environment has hurt business confidence—Citigroup’s Economic Surprise Index, a widely followed indicator of how data matches expectations, is in decline. The composite leading indicator, designed to show short-term economic movements, is at the lowest level in almost a decade. Trade tensions are likely to continue weighing on global growth in the coming years, with the World Trade Organisations Outlook Indicator at its weakest level since 2010.