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Trump slaps tariffs on China: Best and worst case scenarios for the global economy

A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

The White House announced US$50-billion in tariffs on Chinese imports Friday, and China is expected to announce retaliatory measures. For Nomura economist Lewis Alexander, the event will signal the beginning of a negotiation process, but, if things get emotional, the situation could go south in a hurry,

“Base case: The US imposes the tariffs almost immediately, either on Friday or early next week. China responds proportionately and both countries take a pause to let negotiations continue. Worst case: The US imposes the tariffs almost immediately, either on Friday or early next week. China responds proportionately and the US decides to respond aggressively by going after the additional $100bn in imports from China that President Trump mentioned a few months ago. Best case: The US delays imposing the tariffs to give more time for negotiations.”

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“@SBarlow_ROB Nomura: best and worst case scenarios for China tariffs” – (research excerpt) Twitter

UPDATED: Tariff announcement is just crossing the wires: “Trump Hits China With Tariffs, Vows More If It Strikes Back” – Report on Business

“China says it will immediately respond on same scale to U.S. tariffs” - Bloomberg

“U.S. futures falter as Trump confirms China tariffs; Canadian dollar nears 76 cents” – Report on Business

“Economist: Trump knows China tariffs retaliation can’t hurt US economy” – (video) CNBC

Related: “Tariff threat could be a ‘death blow’ in the heart of Canada’s auto industry” – CBC

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CIBC research notes that Canadians are beginning to address debt levels with recent data showing the slowest credit growth in five years,

“Canadian household debt ratios improved for the second straight quarter, as credit growth hit five year lows. Notably, the debt-to-disposable income [ratio] fell sharply in Q1 to 168.0 per cent after hitting a record high last year … we may finally be at a turning point.“

“@SBarlow_ROB CM on Cdn household debt. “Canadian household debt ratios improved for the second straight quarter, as credit growth hit five-year lows. ” – (research excerpt) Twitter

“@OnTheMoneyCBC Canadians have managed to get a little less riddled with debt for the past two quarters, and CMHC says that dip in Ont. housing prices wasn’t a crash” – (video with Scotia economist Brett House) CBC

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Everybody expects China to re-open the credit spigots but for now, debt defaults and infrastructure investment are slowing, threatening commodity demand,

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“As a result of the monetary tightening, at least 20 companies have failed to meet bond or loan repayment obligations so far this year. Bonds worth about 20 trillion yuan are set to expire by next year, triggering fears that the number of defaults could spiral as China’s tight leash on liquidity can make it difficult for indebted firms to access fresh funds.”

“Debt defaults to rise as China focuses on tackling bloated state enterprises, local governments in deleveraging drive” – South China Morning Post

“@adam_tooze Total Social Financing growth in China has slowed to rates not seen in 15 years. This is why the credit impulse numbers are in negative territory.” – (chart) Twitter

“China’s economy dials back a notch, with an unexpected slowdown in factory output and lackluster investment and consumption” – Bloomberg

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Tweet of the Day:

Diversion: “The 29 most rewatchable movies of all time” – Business Insider

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