Trade war between Trump and the world could hit Romania hard, Central Bank warns

Sorin Melenciuc 08/08/2018 | 14:41

Romania could be hit by the global trade war via the trade channel both directly and indirectly, in a scenario that assumes an extension of higher import tariffs, according to the latest inflation report of the National Bank of Romania (BNR), released on Wednesday.

“On the external front, a risk factor that became more relevant over the past few months is the further escalation of trade protectionism,” the central bank said.

The central bank considers two scenarios: a moderate one, based on the current assessments, starting from the measures already in place – higher import tariffs.

These measures “point to a marginal impact on the global economy”.

But in a scenario that assumes an extension of these measures to a wide range of goods as well as their implementation by all trading partners, “the negative effects could become considerable”, BNR experts say.

“In such a case, Romania’s economy would be affected via the trade channel both directly and indirectly, as a result of weaker external demand and higher prices of imported goods, also amid the – highly likely – increase in global risk aversion, with an impact on the exchange rate of the leu versus the major currencies,” the report indicates.

The central bank estimates international commodity prices – energy prices in particular – as a major risk factor, amid the recent developments in oil prices and elevated volatility on international markets in the past year.

A recent BR Analysis showed that a trade war between the main global economies triggered by rising import tariffs could hit Romania, a member of the European Union, through several channels, mainly by imported inflation, lower foreign investment and higher unemployment rates.

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