Deal or No Deal, Trump Trade War With China Scars Global Economy



Andrew Mayeda | Bloomberg

  • China export orders slump as Europe manufacturing weakens
  •  Trade war may have lasting world economic damage: BoA analyst

A deal between the U.S. and China to drop tariffs couldn’t come soon enough for a global economy already showing strains from the trade war.

Economists predicted that eye-for-an-eye tariffs by the U.S. and China could eat into world growth, and there’s evidence that’s happening. Export orders in China slumped last month to the lowest level in a decade amid signs of a deepening factory downturn in the world’s second biggest economy. In the euro area, a key gauge of manufacturing activity has dropped to a level consistent with contraction.

“A deal is going to be a huge sigh of relief,” said Ethan Harris, head of global economics research at Bank of America Merrill Lynch. “In the last year, you’ve had this general chipping away of global confidence, and the trade war is a big part of that. But there’s probably been some permanent damage here, so the recovery won’t be as substantial as the damage.”

The darkening economic picture raises the stakes for a push by the U.S. and China to end their eight-month trade war, or at least reach a lasting truce that avoids any further escalation. The two sides are closing the gap on issues such as Chinese purchases of U.S. goods, buoying hopes that President Donald Trump could hold a deal-clinching summit with his Chinese counterpart Xi Jinping as early as the middle of this month.

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