EU says trade tensions, protectionism threatening U.S. economy

The European Commission said Tuesday that “trade tensions” with China and “protectionist moves” are among the prominent risks to the U.S. economy.

The commission, the executive arm of the European Union (EU), said in its latest European Economic Forecast that U.S. “economic activity is set to moderate toward potential growth as tailwinds from macroeconomic policies are expected to fade.”

In the chapter on U.S. economy titled “Soft landing with prominent risks to the outlook,” the EU body projected that after registering a 2.9-percent growth rate in 2018, the U.S. economic expansion may well lose steam, decelerating to 2.4 percent in 2019 and 1.9 percent in 2020.

“Uncertainty related to a possible resolution of the US-China trade tensions remain elevated while the risk of further protectionist moves in US trade policy persists,” said the report.

The EU also warned that accommodative U.S. monetary policy at times when the economy is at full employment risks exacerbating imbalances and vulnerabilities, “especially as some asset valuations appear to be stretched and debt levels continue to rise.”

“Furthermore, the projected increase in the government debt level is set to limit the fiscal policy buffers in an event of economic downturn,” said the forecast, predicting a “deteriorating fiscal position” of the U.S. economy.