Key week for EU as growth and trade take centre stage

ECB awaits Q2 growth numbers as Juncker heads to Washington for trade talks

The jury is still out on whether the euro zone economy hit a soft spot in the first quarter of 2018 or whether it’s on the cusp of a more protracted cooling off period after a surprisingly strong 2017.

Equally, no one seems to have a handle on whether recent trade tensions with the US will turn into a full-blown trade war or morph into something more manageable.

Most economists believe the European Central Bank’s decision to begin turning off the stimulus tap in September by cutting monthly bond purchases to €15 billion before phasing them out entirely in December was the right call. However, poor second-quarter growth numbers for the bloc, due out later this month, may cause some to doubt, as will the increased risk of a hard Brexit and a global trade war.

European Commission president Jean-Claude Juncker heads to Washington this week for talks with US president Donald Trump, who has threatened to extend US tariffs to European cars, and who recently described Europe as a "foe" when it comes to trade.

To date, Europe, like Canada, Japan and China, has sought to placate Trump, but this doctrine of appeasement is wearing thin with some. EU commissioner Phil Hogan has said the bloc must respond to Trump's trade policies by "bullying" him back.

Hogan also raised the prospect of the US offering the UK a quick post-Brexit trade deal in order to destabilise the EU.

European trade commissioner Cecilia Malmstrom, who will accompany Juncker, said last week that the EU was preparing a list of US products to hit if Trump imposed tariffs on EU cars.

The US imported about €294 billion of cars and car parts in 2017, €58 billion of which originated from Europe, according to an internal EU memo seen by Bloomberg.

While the US seems to be expecting a “significant” trade offer, Malmstrom says Juncker’s main aim is to de-escalate the situation. Here’s hoping.