UBS cut its outlook for global growth today, as trade war tensions weighed on the Swiss bank’s optimism for the year ahead.
World growth is projected to grow by 2.5 per cent in the coming quarters, falling from a previous estimate of 3.2 per cent, as UBS cited the ongoing trade dispute between Washington, D.C. and Beijing for the cut.
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Speculation that central banks across the world will cut interest rates has also driven a sharp fall in bond yields this year, with UBS cutting its expectations for 10-year US Treasury yields by 25 basis points to one per cent for 2019.
At the start of this month the US and China slapped a fresh round of tariffs on each other’s goods, ratcheting up tensions following a turbulent 12 months for global markets.
In the first phase of Donald Trump’s latest trade move against Beijing, the US President has started to implement 15 per cent tariffs on over $125bn (£102.5bn) of consumer imports from China such as headphones and flat panel television sets.
China has also begun introducing tariffs on US crude oil in response.
In August Goldman Sachs also cut its fourth-quarter growth estimates for the US by 20 basis points to 1.8 per cent, citing the tot-for-tat tariff battle for the move.
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Trump has targeted roughly $300bn in annual Chinese imported goods imports for 15 per cent tariffs at two stages, from 1 September and 15 Dec.
If fully imposed, Trump’s trade plans would mean that nearly all Chinese imports – worth roughly $550bn – would face punitive tariffs.