Governor of the Bank of Japan, Haruhiko Kuroda, is among central bankers concerned over the spat between the US and China. Andrew Caballero-Reynolds/AFP
Governor of the Bank of Japan, Haruhiko Kuroda, is among central bankers concerned over the spat between the US and China. Andrew Caballero-Reynolds/AFP

Central banks nervous at prospect of a trade war



Global central bankers sounded the alert that a trade war would leave them worrying more about the economic fallout than any boost tariffs would give to inflation.

As US President Donald Trump threatens to impose levies on imported steel and aluminum and duties on as much as $150 billion of Chinese goods, uncertainty over global commerce is casting a pall over an otherwise strong outlook.

The tensions were a key theme at the IMF meetings in Washington, with policymakers on Saturday warning of challenges in a communique. Colombia’s central bank president said a trade war would be "catastrophic", his Paraguayan peer said it would be "bad for everyone", while Japan’s chief described protectionism as "very undesirable".

Monetary policymakers may yet be spared such an outcome: US Treasury Secretary Steven Mnuchin said he is considering a trip to China, adding he’s “cautiously optimistic” of reaching an agreement. That would take one cloud off the horizon, even as a huge pile of global debt and frothy markets threaten the current economic sunshine.

Should Mr Mnuchin’s optimism fizzle out, central bank chiefs may be left grappling with the stagflationary blow from tit-for-tat tariffs that push up inflation in the short-term as higher duties lift import prices. That would suggest a need to keep monetary policy looser for longer.

“You have the direct effect on prices, of imposing tariffs, but you have the recessionary forces that will always generate significant downward bias in prices,” Alejandro Werner, head of the International Monetary Fund’s Western Hemisphere department, said. “You would expect, if anything, looser monetary policy than in the base line.”

Central bankers echoed that concern at a time when the IMF is forecasting global growth of 3.9 per cent this year and next, which would be the fastest pace since 2011.

A spiral of protectionism “would have a very big impact on growth”, Colombia’s central bank president Juan Echavarria said in Washington. “It would be catastrophic for global growth. What we learned from the 1930s is that when all the countries start raising tariffs, economies stagnate.”

So far, trade risk alone has not been enough to stop the turn of the global policy tightening cycle. The US Federal Reserve is set to hike its benchmark interest rate again by June and trade-reliant Singapore, which uses its exchange rate as its main policy tool, tightened the screws this month.

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Read more:

IMF says global growth to slow in medium term as it warns of trade war harm

Should a China-US trade war worry UAE investors?

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It could be that central banks keep tightening even amid talk of a trade war, said Rob Subbaraman, head of emerging markets economics at Nomura in Singapore. He warned investors against the “illusion” of a “monetary policy put” - assuming trade risks are a reason to maintain accommodative policy.

Still, signs of a moderation in growth momentum in the first quarter are giving central bank chiefs reason for caution. Bank of England governor Mark Carney said market expectations for UK interest-rate increases may be too high and European Central Bank policy makers now see scope to wait until their July meeting to announce how they’ll end their bond-buying programme.

Protectionism “will be very undesirable as the global trade and economy are finally expanding in a stable manner,” said Bank of Japan governor Haruhiko Kuroda, who is forecast to leave policy unchanged at a meeting on Friday. “We have to be very cautious.”

Even in the US, minutes of the Fed’s March 20 and 21 meeting showed that a “strong majority” of participants saw downside risks to the economy from global trade tensions. Mr Trump’s trade policies are also undermining previously robust consumer and corporate confidence.

ECB President Mario Draghi may have more to say on Thursday when he and fellow policy makers are predicted to leave monetary policy unchanged.

Worries even abound in those countries that might benefit from a spat between the US and China as demand is rerouted to their products. While he acknowledged soya bean exports could rise in the event of a skirmish, Paraguayan central bank chief Carlos Fernandez Valdovinos, said “maybe it’s beneficial for one sector, maybe for one year, but in the medium-term it’s bad for everyone.’’

Brazilian central bank president Ilan Goldfajn concurred.

“If you provide me with two options - benefiting from this conflict, or not having this conflict and continuing the benign global environment - I would prefer to continue having the benign global environment,” Mr Goldfajn said.

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First Person
Richard Flanagan
Chatto & Windus 

The National's picks

4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young

NO OTHER LAND

Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal

Stars: Basel Adra, Yuval Abraham

Rating: 3.5/5

How to apply for a drone permit
  • Individuals must register on UAE Drone app or website using their UAE Pass
  • Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
  • Upload the training certificate from a centre accredited by the GCAA
  • Submit their request
What are the regulations?
  • Fly it within visual line of sight
  • Never over populated areas
  • Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
  • Users must avoid flying over restricted areas listed on the UAE Drone app
  • Only fly the drone during the day, and never at night
  • Should have a live feed of the drone flight
  • Drones must weigh 5 kg or less
Key facilities
  • Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
  • Premier League-standard football pitch
  • 400m Olympic running track
  • NBA-spec basketball court with auditorium
  • 600-seat auditorium
  • Spaces for historical and cultural exploration
  • An elevated football field that doubles as a helipad
  • Specialist robotics and science laboratories
  • AR and VR-enabled learning centres
  • Disruption Lab and Research Centre for developing entrepreneurial skills

Ant-Man and the Wasp

Director: Peyton Reed

Starring: Paul Rudd, Evangeline Lilly, Michael Douglas

Three stars

The smuggler

Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple. 
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.

Khouli conviction

Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.

For sale

A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.

- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico

- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000

- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950

A MINECRAFT MOVIE

Director: Jared Hess

Starring: Jack Black, Jennifer Coolidge, Jason Momoa

Rating: 3/5

PROFILE OF SWVL

Started: April 2017

Founders: Mostafa Kandil, Ahmed Sabbah and Mahmoud Nouh

Based: Cairo, Egypt

Sector: transport

Size: 450 employees

Investment: approximately $80 million

Investors include: Dubai’s Beco Capital, US’s Endeavor Catalyst, China’s MSA, Egypt’s Sawari Ventures, Sweden’s Vostok New Ventures, Property Finder CEO Michael Lahyani

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Test

Director: S Sashikanth

Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan

Star rating: 2/5

MATCH INFO

Uefa Champioons League semi-final:

First leg: Liverpool 5 Roma 2

Second leg: Wednesday, May 2, Stadio Olimpico, Rome

TV: BeIN Sports, 10.45pm (UAE)

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AT4 Ultimate, as tested

Engine: 6.2-litre V8

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Transmission: 10-speed automatic

Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)

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Specs

Engine: 51.5kW electric motor

Range: 400km

Power: 134bhp

Torque: 175Nm

Price: From Dh98,800

Available: Now

COMPANY PROFILE
Name: Kumulus Water
 
Started: 2021
 
Founders: Iheb Triki and Mohamed Ali Abid
 
Based: Tunisia 
 
Sector: Water technology 
 
Number of staff: 22 
 
Investment raised: $4 million 

Meatless Days
Sara Suleri, with an introduction by Kamila Shamsie
​​​​​​​Penguin 

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In numbers: PKK’s money network in Europe

Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010

Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille

Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm

Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year

Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”

Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners

TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013 

LA LIGA FIXTURES

Friday (UAE kick-off times)

Real Sociedad v Leganes (midnight)

Saturday

Alaves v Real Valladolid (4pm)

Valencia v Granada (7pm)

Eibar v Real Madrid (9.30pm)

Barcelona v Celta Vigo (midnight)

Sunday

Real Mallorca v Villarreal (3pm)

Athletic Bilbao v Levante (5pm)

Atletico Madrid v Espanyol (7pm)

Getafe v Osasuna (9.30pm)

Real Betis v Sevilla (midnight)