LONDON – In the year since US President Donald Trump escalated America’s trade war with China, policymakers and financial markets have been obsessed with the dangers to both countries’ economies. Yet the real threat the conflict poses to the global economy lies elsewhere.

Despite all the lurid headlines about the trade war causing a recession in the United States or some kind of collapse in China and its Asian neighbors, recent economic data reveal a very different picture: the US and Chinese economies have performed quite decently and in line with trends that were already well established before the escalation of the trade war. The main victim has been an innocent bystander: Europe.

The unexpected distribution of damage can be clearly seen in the International Monetary Fund’s quarterly revisions of its economic projections. The latest revisions, published in late July, forecast 3.2% global growth in 2019, down from 3.7% in the IMF’s October 2018 projection. But this downward revision was attributable to neither the US nor China. The Chinese economy is expected to grow by 6.2%, exactly the rate predicted a year ago. The forecast for US growth is 2.6%, up 0.1 percentage points from a year ago. The projections for Japan and other Asian economies are also essentially unchanged. This leaves Europe responsible for almost the entire global slowdown.

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