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ECB warns on trade tensions as eurozone economy falters again

The European Central Bank (ECB) warned that a rise in trade protectionism would undermine the global economy, and said the US would be among the worst-affected.

The cautionary comments coincide with data showing factory orders in Germany unexpectedly slid for a third month in March, another sign of the weakness that’s dogged the eurozone economy since the start of the year.

Separate reports showed investor confidence in the currency bloc fell for a fourth month and a retail gauge suggested that sales contracted for the first time in more than a year.

The ECB has cited tariffs as one of its chief concerns as the institution’s policy makers edge toward the end of their stimulus programmes.

President Mario Draghi has warned that while the impact of already-adopted protectionist measures is limited, the prospect alone of trade war between the US and China - two of the bloc’s biggest trading partners - could damage confidence and reduce consumption and investment.

“In a scenario in which the US increases tariffs markedly on imported goods from all trading partners that retaliate symmetrically against it, the outcome for the world economy would be clearly negative,” ECB researcher Lucia Quaglietti wrote in an Economic Bulletin article published on Monday.

“The impact could be particularly severe in the US."

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