The specter of a no-deal Brexit and the arrival of new tariffs in the US-China trade war are pushing Fitch cut global growth forecasts.
In the latest update of his “Global economic outlook”, the rating agency has made “significant downward revisions” of GDP over the next 18 months.
Here are the main changes in the estimates:
- Eurozone from +1,2 to +1,1% in 2019 and from +1,3 to +1,1% in 2020;
- Use from +2,4 to +2,3% in 2019 and from +1,8 to +1,7% in 2020;
- China from +6,2 to +6,1% in 2019 and from +6% to +5,7% in 2020.
In fact, these predictions only take into account the escalation of protectionism on the Washington-Beijing axis. Fitch recalls how the US has sharply stepped up its offensive by raising tariffs on goods worth $250 billion from 25% to 30% starting in October and introducing a new 15% tariff on other goods worth $300 billion, which it will become fully operational by December.
Under current US trade policy, Fitch points out, the average effective tariff on Chinese goods will rise to more than 20% by the end of the year, impacting essentially all Chinese export goods. “Our initial estimates – explain Fitch economists – suggest that this shock will reduce China's growth in 2020 by 0,3% compared to our June estimate even taking into consideration new stimulus measures through the reduction of required reserves”.
But that's not all: as far as the Eurozone is concerned, Fitch warns that “growth prospects would be significantly lower in the event of a no-deal Brexit, a risk that further increased during the summer”. In the event of a no-deal exit from the EU, the UK economy could collapse by 1,4% next year, while growth in the Eurozone would experience a decline of 0,4 percentage points, to +0,7% .
