The Macro Report | October 2018

Tweets and trade tensions


The outlook for global economic growth is easing because of trade tariffs, weakness in emerging markets, and rising oil prices. In the United States, growth will remain steady this year but is expected to slow in 2019 as the fiscal stimulus abates. The United States, Mexico, and Canada reached a new trade deal that is a lot like NAFTA but with a few upgrades (and a few concessions). The United States-Mexico-Canada Agreement (USMCA) increases dairy exports from the United States to Canada and improves protections for workers in all three countries.

The story isn’t so encouraging for China or Italy. The United States and China continue to be locked in a spiraling trade war. Policy makers in Beijing stepped up efforts to ease monetary policy to lift growth in a slowing economy as the trade conflict intensifies. China’s hopes of negotiating a free trade pact with Canada or Mexico were dealt a setback by a provision in the USMCA that aims to forbid such deals with “non-market” countries. Meanwhile, Italy’s ballooning debt levels and an unstable coalition government are weighing on the European Union (EU) and global markets.


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The outlook for global economic growth is easing because of trade tariffs, weakness in emerging markets, and rising oil prices.