World economy on edge as US, China war rages

The trade war between the US and China continues to loom large over the world economy.

The two negotiating teams are on a break this week after talks ended Friday in Washington, without a deal yet still alive.

President Donald Trump last week boosted duties on more Chinese sales to the US and is paving the way to extending them to all America’s imports from its rival unless Beijing makes concessions and strikes a pact within a month.

Real demand

Meantime, China is planning how to retaliate and has told Washington that it must remove all extra tariffs, set targets for Chinese purchases of goods in line with real demand, and ensure that the text of the deal is “balanced” to ensure the “dignity” of both nations.

“If the new tariffs stick, US consumers may absorb the costs,” said Tom Orlik, chief economist at Bloomberg Economics. “And China’s central bank, among others, will likely cut interest rates.”

With the outlook for global growth now darkening again, investors will look to a series of data from around the world on Wednesday for insight into its recent health.

The trade war aside, there’s plenty of key indicators set for release around the region too this week. On Wednesday, investment, output, retail sales and unemployment numbers from China will give the latest reading on whether the recent stabilization in its economy is holding. Industrial output and retail sales likely eased, according to Bloomberg Economics

India’s inflation report due Monday is set to show a modest acceleration in prices. And after Australia’s central bank flagged jobs as the determining factor in its interest-rate outlook, Thursday’s employment report takes on extra significance.