German investor mood slumps on trade war fears

Germany, China committed to multilateral order: Merkel

FRANKFURT, July 10, (Agencies): Confidence among investors in Germany plunged sharply in July, the ZEW economic institute said Tuesday, reaching its lowest level since August 2012 over signs that a trade war was far from abating.

“Above all, fears of an escalation in the international trade war with the United States” drove the institute’s barometer based on a survey of financial players down 8.6 points to reach -24.7, ZEW president Achim Wambach said.

President Donald Trump has hit steel and aluminium imports to the US with tariffs and threatened to do the same to European cars, after the European Union retaliated with border taxes of its own on American goods.

Major German firms have also suffered from the White House’s trade war with Beijing, the second front in Trump’s battle to slash US deficits, as their cars built in America face new tariffs when entering China.

Investors’ views of the current situation in both Germany and the 19-nation eurozone worsened, suggesting recent “good news on industrial production, industrial orders and the labour market are more than cancelled out by the expected negative effects on exports” from the trade war, Wambach said.

Investors surveyed by ZEW also saw a bleaker future outlook for the 19-nation eurozone, with that index falling 6.1 points to reach -18.7.

ZEW polled 201 financial analysts and investors to compile its monthly index.

Meanwhile, Germany and China are both committed to multilateralism and a rules-based global trade order, German Chancellor Angela Merkel said at a joint news conference with Chinese Prime Minister Li Keqiang on Monday.

Speaking after a joint government meeting at which a raft of economic cooperation agreements between German and Chinese companies were signed, Merkel also praised China for opening up its markets to further foreign investment.

“We both want to sustain the system of World Trade Organisation rules,” she said. “But we also discussed market access - you could call it reciprocity,”

she added, reflecting widespread concern among European officials that Chinese firms find it easier to invest in Europe than vice versa.

Both exporting powerhouses stand to lose from a looming trade conflict with the United States.

German exports rose in May, suggesting trade disputes in recent days with the United States haven’t yet damaged Europe’s biggest economy.

The national statistics agency said Monday that exports rose by 1.8 percent over April. Compared with a year earlier, exports were down 1.3 percent.

Analyst Carsten Brzeski at ING said a recent weakening of the euro currency’s exchange rate should more than offset the negative effects of U.S. tariffs on European aluminum and steel. However, he added that “looking ahead and despite the very benign impact of trade tensions so far, a fullyfledged trade war would surely leave negative marks on the German economy.”

For the moment, “the hard data tells a different story.”