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September 28, 2018

Global Economy: Tariff war clouds darken

  • Q2 growth in the United States (US) got a boost from the pick-up in exports asshipments were preponed to avoid tariffs
  • Strong domestic demand and pick-up in capital spending propped up Japan’s Q2growth
  • China’s trade surplus narrowed in August on record high imports growth
  • Brent crude oil prices eased cooled 2.4% on-month in August, following the dealbetween major oil exporting economies to increase crude oil output

Geopolitical headwinds battered the global economy, which stood firm in the face of tariffspats, currency fluctuations, and nervous investors. The second quarter (Q2) of 2018reflected strong growth for most economies. Among the major advanced economies, the USand Japan posted solid Q2 growth, while euro zone recorded stable numbers. Among theemerging market economies, China continued with strong and steady growth, in line with itsgovernment’s 6.5% growth target for 2018. Growth across these economies is largelysupported by domestic demand.


However, threats lurk on the horizon, particularly with regard to global trade which has beensailing in choppy waters. The US-China trade war escalated in August, with the secondround of the tit-for-tat tariff war kicking off on the 23rd despite trade negotiations betweenthe nations. With this, $50 billion ($34 billion in the first round and $16 billion in the second)worth of each other’s imports have been subjected to 25% tariff by both countries.