The global economy has been hitting more patches of turbulence over the past few months as trade tensions are high, with the US keeping the pressure on two of its top three trading partners – Canada and China, according to analysts at Royal Bank of Canada.
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“Although the US and Mexico came to an agreement on trade in late August, Canada has yet to sign on to a revamped NAFTA, and the White House is threatening auto tariffs if a resolution can’t be found.”
“The US is also threatening to put tariffs on $200 billion of Chinese imports. Global trade activity has started to ease with the persistence of these trade frictions opening the door to further slowing ahead.”
“Business activity indicators remain consistent with growth however they have started to turn lower in some countries.”
“In the emerging market economies, indices have fallen in China, Turkey and Russia since the beginning of the year while among advanced economies the Euro-area has turned down. With policy uncertainty high and unemployment rates running below their pre-recession averages the risk is rising that the peak in global growth is behind us.”
“Despite the headwinds, we expect the global economy to post a strong gain in 2018 and to avoid a significant downturn next year. Monetary policy stimulus remains, and some countries have opened the spigot on the fiscal front.”
“The US tax cuts and large infrastructure bill will keep the economy on a firm growth path for the remainder of 2018. In 2019, growth is likely to slow modestly as the Federal Reserve continues to retract policy support via interest rate increases and as the lift from fiscal policy fades.”
“In Canada and the Euro-area, our forecast is for growth to be more modest, although both regions will likely expand close to their economy’s potential rate. The UK economy will lag its trading partners as Brexit uncertainty dampens activity.”
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