ECONOMY & MARKETS
The Eurobank Research Bulletin
Trade Wars: Risks for the Global, Peripheral and Greek Economy
The Economic Analysis and Research Unit of Eurobank published today a study entitled “Trade Wars: Risks for the Global, Peripheral and Greek Economy”, to which all of the Unit’s analysts contributed. Tariff increases have the potential to incur a deceleration of global trade, investment and growth, although possible losses are not equally divided among countries and areas; effects on inflation –and thus on central bank rates- are more ambivalent. An exact assessment is also complicated by the pre-existing distortions in international trade, which have results similar to those of tariffs, as well as the high uncertainty regarding the course of the negotiating process and its final outcome. In the baseline scenario of no escalation/retaliation and bilateral deals, impact could be manageable and short-lived; in the adverse scenario, deflationary (or for some countries stagflationary) effects could be more serious and more protracted. Greece, is relatively less affected by the direct impact of tariffs and has counters to deal with any secondary effects, including the resilience of tourism, fiscal buffers, a boost from defense investment, and a large-sized RRF. Similarly, the Cypriot and Bulgarian economies are relatively more protected. At a longer-term horizon, trade wars have the potential to re-frame the geo-economic competition between US and China and global supply chains.
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