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New round of U.S. tariffs a 'modest' hit for euro area: ECB

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New round of U.S. tariffs a 'modest' hit for euro area: ECB
FILE PHOTO: Sign of the European central Bank (ECB) is seen ahead of the news conference on the outcome of the Governing Council meeting, outside the ECB headquarters in Frankfurt, Germany, March 7, 2019. REUTERS/Kai Pfaffenbach/File Photo   -   Copyright  Kai Pfaffenbach(Reuters)
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FRANKFURT (Reuters) – A new round of tariffs between the United States and its main partners would only cause a “modest decrease” in the pace of economic growth in the euro zone, according to research by the European Central Bank.

The study simulated a two-way, 10 percent increase in tariff and other trade barriers between the world’s largest economy and all its partners.

It showed an “overall modest decrease in activity” in the euro area due to fading global confidence outweighing a boost to EU exports to countries other than the United States.

GRAPHIC: Welfare effect of car tariffs –

The study also showed a decrease of fewer than 10 basis points in the real income of German households from tariffs on the automotive sector even after taking into account cross-country production linkages, known as global value chains (GVC) in economic parlance.

GRAPHIC: Estimated impact of an escalation in trade tension –

To read the study, which builds on ECB research from last year, please click:

(Reporting By Francesco Canepa; Editing by Angus MacSwan)

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