New trade 'war'/ Investments in Europe and the world decrease significantly

2025-03-21 17:00:00, Ekonomi CNA

New trade 'war'/ Investments in Europe and the world decrease

Uncertainty around trade will have a major impact on global growth, reducing business investment in the EU and the world by at least 2% this year, Oxford Economics finds.

Businesses across major economies, including the EU, are expected to cut investment plans due to rising uncertainty.

In particular, this climate has been created by US trade policies, which are currently affecting third-country imports, while a broader trade war is taking shape.

According to the latest report from Oxford Economics, trade policy uncertainty alone is projected to dramatically cost the global economy, largely due to a decline in investment.

The report examines four possible scenarios to see what impact trade policy uncertainty could have on investment and consequently on the global economy.

In the event of a rapid decline in uncertainty, investment is expected to recover next year. This could happen if, for example, ongoing tariff threats and negotiations simply result in a one-off reset to a new higher tariff level, with no further changes on the cards. In this case, the currently projected decline in investment in the US, China, UK and EU would be recovered in 2026 and beyond.

New trade 'war'/ Investments in Europe and the world decrease

If, on the other hand, a short-term tariff increase is followed by a prolonged period of uncertainty, falling only until 2028, "it will cause greater economic damage beyond this year,"

Investment could fall by around 10% in the US and China, 6% in the Eurozone and 4%-5% in the UK.

The third and fourth scenarios in the report see the effects of trade policy uncertainty gradually falling to a still relatively high level or not falling at all, with uncertainty remaining at the current level until the end of 2029.

If it remains at its high levels over the next few years, "it would create a significant drag on global investment, reducing it by 10%-20% in major economies over several years," the report said.

According to Oxford Economics, the worst-case scenario would result in a 20% decline in investment in China, 14% in the US, 10% in the Eurozone and 7% in the UK by 2029. /CNA