Fitch downgrades US, China, Eurozone growth over Trump protectionism

ECONOMYNEXT – Fitch Ratings has downgraded growth for the US, China and Eurozone as nationalist US President Donald Trump push up import duties on China, and uncertainty in Europe over Brexit.

“..[T]he primary cause of the deteriorating outlook for the next 12-18 months is trade policy,” Fitch Ratings said.

Tighter credit conditions in China and reduced global dollar liquidity and macro-economic and ‘significant macro challenges in some large emerging markets’ was also hurting growth, Fitch said.

US growth has been cut to 1.7 percent in 2020 from 1.8 percent and 2.3 percent for the current year from an earlier 2.4 percent.

Fitch said China’s growth has been lowered to 5.7 percent in 2020 from 6.0 percent and for this year to 6.1 percent from 6.2 percent.

For the Eurozone growth has been cut to 1.1 percent from 1.3 percent for 2020, and 1.1 percent from 1.2 percent for 2019.

“Eurozone growth prospects would be materially lower in the event of a ‘no-deal’ Brexit, a risk that has risen further over the summer,” Fitch said.

Trump’s protectionism will see taxes on 250 billion US dollars of Chinese goods going up 30 percent effective October from 25 percent already charged and a new 15 percent tax on remaining about 300 billion by December.

It will see all Chinese good hit by about 20 percent tariffs.

“US economic growth has shown greater resilience of late with robust consumption growth, tight labour market conditions and a widening federal fiscal deficit supporting domestic demand,” Fitch said.

“Nevertheless the manufacturing sector has slowed markedly and firms are becoming more cautious on investment spending in the face of rising trade policy uncertainties.

“Our forecasts for investment growth have been revised down and show a sharp slowdown compared to 2018.”

Protectionists believe trade is a zero sum game, and higher prices of goods for the general public and reduced consumption of actual goods or services will somehow increase prosperity and living standards of the people. (Colombo/Sep09/2019)