Draghi sees little impact from trade tensions for now

FRANKFURT AM MAIN: European Central Bank chief Mario Draghi yesterday said the US-China trade spat has so far had little impact on the eurozone economy, but warned that the risk of further retaliation was a key concern. “So far the direct effects of tariffs that have been imposed or announced to be imposed are not big,” Draghi told students at an event in Frankfurt.

But the top central banker warned that the world had only seen “the first round” in the row between the United States and China. “The key issue is retaliation,” he warned. US President Donald Trump last month sparked fears of a potentially devastating trade war between the world’s top two economies after threatening massive tariffs on Chinese imports.

Heated rhetoric on both sides has prompted warnings of tit-for-tat measures against hundreds of billions of dollars worth of goods. But Chinese President Xi Jinping on Tuesday soothed world markets with a conciliatory speech pledging to further open up the country’s economy, ease auto tariffs and take action on intellectual property rights, all major US concerns.

In response, Trump tweeted that he was “Very thankful for President Xi of China’s kind words”, adding “We will make great progress together!”

International Monetary Fund chief Christine Lagarde also waded into the USChina stand-off on Wednesday, warning that protectionist trade policies would undermine global growth.

Draghi said the greatest threats to the eurozone’s robust recovery came from potential new barriers to trade and geopolitical risks such as the diplomatic tensions between the European Union and Russia, and the worsening security situation in the Middle East.