The additional tariffs threatened by the US on China and on auto imports more generally would raise average US tariffs to rates not seen in half a century (Table 2). If implemented, they could reduce global GDP by an additional 0.6% through direct trade channels alone (Table 1). 4 5  US tariffs on steel and aluminium and the reciprocated 25% tariff on $ of US imports from China. The hit to global GDP may be cushioned somewhat by trade diversion, which will likely benefit non-China Asian EMEs. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  Table 1: Direct effects of tariff increases small but indirect effects potentially far greater Change in level of GDP (%) US  China  Euro area  UK  World (PPP-weighted)  Measures taken in previous years  -0.4  -0.3  -0.1  -0.1  -0.1  Additional US-China tariffs implemented in May and June 2019  -0.5  -0.4  -0.2  -0.1  -0.2  Additional marginal reduction in GDP in the event that… US-China raise tariffs on all imports to 25%  -0.5  -0.5  -0.1  -0.1  -0.2  US imposes 25% tariffs on all auto imports and all countries reciprocate  -1.2  -0.3  -0.3  -0.2  -0.4  -2.1  -1.2  -0.6  -0.4  -0.8  Total if all measures are implemented  Sources: Bank calculations. Notes: The table shows the peak impact over a three-year period.
BIS central bankers’ speeches  3  Our private debt has improved – that is to say it has declined – in recent years, and we are now closer to the average for the euro area countries as a whole. Yet even so, despite the emergence in the past three years of a substantial external surplus, our external debt is a factor of vulnerability that cannot be underestimated because, excluding the Banco de España, public and private and bank and non-bank debt refinancing requirements exceed 45% of our GDP each year. Of this volume, around 60% relates to liabilities incurred by financial institutions, slightly more than 20% to general government and marginally less than 20% to non-financial corporations. Given this heavy financial dependence on the external sector, a downturn in the economic growth outlook might have a considerable effect on the terms of such financing and on the effort required to meet the foreign obligations incurred. Improving our external position hinges largely on our competitiveness, that is to say on our productivity. Allow me to elaborate on this point. 4. The improvement in productivity  In the long run, economic growth is essentially determined by gains in productivity.