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Trade War Escalation Hurting Global Economy Significantly: Ifo

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An intensification of trade tensions, especially between the U.S. and China, is having considerable adverse effects on the world economy, the German think tank ifo said in a report released Monday.

Elsewhere, economists at Goldman Sachs warned that the trade war is having a larger-than-expected impact on the U.S. economy.

The ifo World Economic Climate indicator dropped to -10.1 in the third quarter from -2.4 in the previous three months, the ifo report showed. In the first quarter, the reading was -13.1.

The current situation index of the survey fell to -5.4 from 1.4 in the previous quarter. The reading was the weakest since January 2017, when it was in negative territory last time.

The expectations measure dropped to -14.7 from -6.1. In the first quarter, the reading was -27.7.

"The intensification of the trade conflict is having a considerable detrimental effect on the world economy," ifo Institute President Clemens Fuest said.

"The economic climate deteriorated in all regions. In the advanced economies and in Asia's emerging and developing economies, experts have revised both their assessment of the situation and expectations downwards," Fuest said.

"By contrast, in Latin America, the Commonwealth of Independent States, and the Middle East and North Africa, only the assessment of the situation was more negative, while estimates for the months ahead remained broadly unchanged."

Expectations for world trade are at their lowest level since the outbreak of the trade conflict last year, ifo said.

Private consumption, investment activity, and short- and long-term interest rates, are expected to weaken in the coming months, the survey found.

The July survey was carried out in 116 countries and received responses from 1,173 experts.

Economists at Goldman Sachs warned on Sunday that the escalation in the U.S.-China trade conflict is causing the risk of recession to rise.

They said in a client note that they expect the Donald Trump administration to impose tariffs on the remaining $300 billion Chinese imports, starting September 1.

Further, they no longer expect a trade deal between the two countries before the 2020 U.S. Presidential election.

Goldman Sachs economists cut the fourth quarter growth forecast for the U.S. by 20 basis points to 1.8 percent, citing a larger-than-expected impact from the trade war with China.

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