World economy resilient to renewed trade tensions

The risk of a global trade war has risen in the past few weeks. President Trump has gone ahead with plans to levy tariffs on steel and aluminium imports, which is likely to provoke retaliation. In fact, just today Mexico announced plans to impose tariffs on a range of US products. What’s more, the US administration has launched another Section 232 investigation – this time into whether imports of cars and car parts pose a threat to national security. For now though, we still expect the global economy to remain fairly strong. Recent data suggest that consumer spending is recovering from a weak Q1. Meanwhile, jobs growth remains strong and monetary conditions supportive. And we doubt that recent political turmoil in Europe will throw policymakers off course. We still expect the Fed to raise rates this month and twice more this year, and the ECB to announce in July that it will draw its QE programme to a close by December.