The tariff pause between the USA and China is likely to lead to a slight economic easing in the short term, which could also support Austria’s economy. According to a model calculation by the Austrian Institute of Economic Research (Wifo), domestic exports to the USA increase by around 1.4 percent in light of a de-escalation. The background is the relief of the US economy, which is expected to lead to a recovery in demand for intermediate and capital goods from Europe.

At the same time, import prices in Austria are also expected to slightly improve: the price level drops by around 0.44 percent according to the model. This development could help to cushion the ongoing inflationary pressure somewhat, Wifo wrote on Tuesday in a press release.

Indirect effects via third markets remain

However, global trade distortions will not fully subside, according to the simulation. Overall economic output in Austria decreases slightly by 0.18 percent despite the export impulse – a sign that indirect effects via third markets remain effective, Wifo continued.

“Austria remains largely spared from the direct effects of the US-Chinese trade conflict but benefits selectively from the short-term easing,” Wifo trade economist Hendrik Mahlkow was quoted. At the same time, Europe should use this phase to strengthen its foreign trade resilience. “The next few months will remain volatile – a return to stable global trade rules is not yet in sight,” the release said.