US ratings agency Fitch out with a note 22 May
- the possibility of a sharp escalation in trade-protectionism remains a key risk for the world economy, despite recent signs of a more moderate approach to reforming trade relations from the US
- the strongly protectionist rhetoric on trade seen during President Trump's election campaign and the new administration's early days in office has not, so far, translated into aggressive unilateral trade measures from the US. However, given the strength of anti-globalisation sentiment in the election and the continued focus of US policy makers on reducing bi-lateral trade deficits, the possibility of a more disruptive and unilateral US approach that is less compatible with the existing global trade governance framework - and much more likely to prompt retaliatory actions from US trade partners - remains a significant risk.
Says Brian Coulton, Fitch's Chief Economist:
"A hypothetical trade war would lead to adverse outcomes in all major economies. The US and the countries directly targeted by the imposition of punitive US import tariffs would see the largest losses of GDP but global repercussions would be significant as business and household confidence falls, asset prices weaken and trade flows are affected more widely, including through disruptions to multinational supply chains,"
Full report here
Meanwhile EURUSD capping at 1.1228 but EURGBP and EURJPY still near session highs
