Consumers still economic bright spot but Europe can’t avoid effects of global trade tensions, says Stenn

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Dr. Kerstin Braun, President of Stenn Group, an international provider of trade finance headquartered in the UK, comments on the Eurostat retail trade figures and drop in Asian markets/FTSE 100: 

"Consumers are still the economic bright spot, able to keep the EU economy from completely flatlining. This result is surprising, given that other drivers, namely manufacturing, are in contraction. Global markets are also suffering after the introduction of new tariffs ignited a new flame in the trade war.

"Europe is dealing with a double-whammy. First, the prospect of a messy Brexit threatens to halve GDP growth, which is already at its weakest point since 2013. 

"Second, the WTO’s ruling against the EU on Airbus lets Trump play “trade war” with a new part of the world. Up to $7.5 billion in tariffs can now be levied. The first items on the list are a 10% tariff on airplanes and a 25% tariff on agricultural products, effective 18 October. The complete list is designed to hit the EU – hard – in some of its biggest export industries. I suspect that the EU will then retaliate with its own tariffs and it’s trade war déjà vu. This isn’t going to end well for anyone, from European farmers, to specialty foods distributors, to the 275,000 workers in America connected to Airbus supply chain and assembly. 

"More broadly speaking, Europe can’t avoid the effects of global trade tensions. In the first half of 2019, world merchandise trade increased by just 0.6% according to the WTO, which just cut its forecast for world trade to its lowest in a decade. 

"The EU services sector is sliding and manufacturing output is at an 81-month low. The German auto sector, the biggest industry in the region’s biggest economy, is suffering from lower global demand, partially due to the US-China trade war. 

"The services and manufacturing slow-down will cause a recession snowball effect – hitting the jobs market, then lowering wages and stagnating prices. 

"One bright spot is that the weakened euro could help exports, with the exception of course to the US and the UK markets, at least until Brexit and the extent of US tariffs is known."