Tit-for-tat trade threats escalate

Author: Portfolio Specialist Group

June 25, 2018

AGF Weekly Perspectives

A recap of last week’s top economic news and what’s to come

Trump stokes global trade tensions 

  • U.S. President Donald Trump threatened a 20% tariff on cars imported from the European Union, which would prompt “equivalent penalties,” according to a European Commission memo.
  • Trump also warned of potential tariffs on another US$200 billion in imports from China. This is in addition to previous tit-for-tariff threats between the two countries on US$50 billion worth of imports.
  • Trump’s investigation into American imports of motor vehicles and parts, meanwhile, could reduce Canada’s growth in 2019 by half a percentage point if it leads to tariffs similar in magnitude to those recently slapped on steel and aluminum, said a recent report from TD Economics.

Canadian inflation stays pat

  • Consumer prices were up 2.2% year-on-year in Canada in May, unchanged from April and well below market expectations for an acceleration to 2.6%.
  • Energy prices were up 11.6% year-on-year, led by gasoline (+22.9%), but offset by falling electricity prices (0.8%).
  • Excluding energy, inflation decelerated to 1.6% (from 1.9% previously).

U.S. home sales slump

  • U.S. existing home sales unexpectedly fell for the second month in a row, down 0.4% to 5.43 million units annualized in May, or 3% below a year ago.
  • U.S. housing starts climbed to an 11-year high of 1.35 mln units annualized, but building permits fell for the second month in a row, down 4.6% in May to a 9-month low of 1.30 mln units annualized, the largest monthly drop since February 2017.

Other economic news

  • The Organization of Petroleum Exporting Countries (OPEC) agreed to increase their combined production by almost 1 million barrels a day.
  • The Bank of England left its key lending rate at 0.5%. The central bank’s Monetary Policy Committee (MPC) voted 6-3 in favour of keeping the rate unchanged.

What’s to come

Canadian inflation and U.S. housing

Wednesday’s speech by Bank of Canada Governor Stephen Poloz highlights a quiet week of economic data in Canada. In the U.S., consumer confidence, new home sales and personal consumption expenditures will be reported.

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