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No winners in a global trade war

During July, President Donald Trump imposed US$34 billion in tariffs on Chinese goods, prompting China to respond with US$34 billion of levies on US imports. The US announced plans to implement a further US$200 billion-worth of tariffs in September. China’s monthly trade surplus with the US climbed to almost US$29 billion during June.

  • China’s economy grew by 6.7% YoY during Q2
  • BRICS leaders pledged to promote an “open world economy”
  • IMF expects emerging & developing economies to grow by 4.9% in 2018

During July, President Donald Trump imposed US$34 billion in tariffs on Chinese goods, prompting China to respond with US$34 billion of levies on US imports. The US announced plans to implement a further US$200 billion-worth of tariffs in September. China’s monthly trade surplus with the US climbed to almost US$29 billion during June. Having grown by 6.8% during the first three months of 2018, China’s economy expanded at an annualised rate of 6.7% over the second quarter. The Shanghai Composite Index rose by 1%.

In a summit between China and the EU, European Commission President Jean-Claude Juncker urged China to continue to open up its economies to foreign companies. European Council President Donald Tusk called for China, the US and Russia to work with Europe to alleviate trade tensions, saying: “There is still time to prevent conflict and chaos”. Elsewhere, at a meeting of the BRICS (Brazil, Russia, India, China and South Africa) nations, the countries’ leaders signed a declaration promoting an “open world economy”. China’s President Xi Jinping warned that there would be no winner in a global trade war, and pledged that China would continue to develop itself “with the door wide open”.

Brazil’s stock market rose strongly over July as a whole, posting a gain of 8.9% over the month. Sentiment was boosted by expectations that interest rates in the US will continue to rise as economic growth gathers pace. However, Brazil’s economy is performing below potential, according to the International Monetary Fund (IMF), which concluded a technical visit to the country during July. The IMF highlighted high and rising levels of public debt, and “uninspiring” medium-term prospects for economic growth; Brazil’s recovery remains vulnerable to risks including uncertainty about reforms and tightening global financial conditions.

Having upgraded Russia’s credit rating in February 2018, ratings agency Standard & Poor’s (S&P) affirmed its “BBB-/A-3” rating in July. S&P believes that Russia’s economy should be able to withstand any shocks resulting from further sanctions.

The IMF expects emerging and developing economies to grow by 4.9% this year and 5.1% next year. In comparison, advanced economies are tipped to expand by 2.4% in 2018 and 2.2% in 2019. The IMF maintained its 2018 forecast of 6.6% for China, but trimmed its prediction for India from 7.4% to 7.3% and cut its forecast for Brazil from 2.3% to 1.8%.