One day after the US administration unveiled plans to raise import tariffs from 10% to 25% on USD 200 billion of Chinese goods, China retaliated by announcing tariffs ranging from 5% to 25% on USD 60 billion of American goods. For China, that leaves just USD 20 billion, given that it imported a total of USD 130 billion from the US in 2017. Non-tariff-related measures can be expected if this tit-for-tat attitude continues.
Brazil continues to catch up with Mexico and other emerging markets. In the last two weeks, its stock market gained 3.6% and the real was up 1.7%. Leading up to the October elections, there are questions as to whether Lula da Silva will run, after he was nominated from his prison cell, as the Socialist Party’s presidential candidate.
Unsurprisingly, the Bank of England raised interest rates for the second time, mainly in response to the buoyant job market. Sterling fell on the news, partly because the rate hike had already been priced in by the markets, and because the pound continues to be dragged down by the uncertainty surrounding the Brexit deal.
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China’s structural decline in economic growth continued last month, with GDP expanding 6.2% on an annualised basis, in line with expectations. However, short-term indicators already show the effects of the government’s stimulus programme – industrial production, retail sales and capital spending all came in above the June consensus estimates...
A major change of course is taking place, and policy normalisation is now out-dated. In light of the potential slump in international trade and sharp decline in inflationary expectations, the Fed and the ECB have already announced rate cuts in the second half of the year.
The G20 summit ended with another truce in the spiralling trade war: President Trump withdrew his threat to impose tariffs on the remaining USD 300bn in Chinese imports and agreed to resume trade talks. However, he did not backpedal on the tariff hikes introduced in early May, or on setting a deadline for reaching a deal...