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MNI INTERVIEW: Global Recession Inevitable Without Trade Fix

--Tariff Pain May Force US and China To End Fight, Hall Says 
By Greg Quinn
     OTTAWA (MNI) - The global economy is heading for recession unless
politicians end damaging fights over U.S.-China trade and Brexit, the chief
economist of Canada's export financing agency told MNI.
     Warning signs include weakness in China's exports, global investment and
industrial production according to Export Development Canada's Peter Hall. U.S.
households will also feel pain if tariffs of 25% are expanded to another $300
billion of Chinese exports targeting consumer goods, he said.
     "There is a tremendous amount to lose," Hall said. "A global recession is
almost inevitable if we don't get that resolution."
     The prospect of a trade war between the world's two largest economies is
already slowing global growth to 3% this year, the worst since the Great
Recession a decade ago, according to the EDC and the IMF. But domestic political
pressures in both the U.S. and China should open a path to prevent things from
getting worse as the damage looms next year, Hall predicts.
     President Donald Trump faces voters who will be angry if tariffs drive up
retail prices, Hall said. "The trade numbers are going down, business numbers
are going down, that's eventually going to wash into consumer spending. And of
course the very tight deadline is next year's election. So the pressure is on
for the U.S."
     China's political stability will further be tested by an economy losing
steam and few tools to sustain growth after a decade of stimulus, he said. "It's
the most radical increase in economic uncertainty anywhere on the planet, so
there are some significant concerns inside of China," Hall said.
     "Some of the numbers coming out of China at the moment are quite alarming,
and when the economy there starts to go south the first thing that leaders think
about is political stability."
     The good news is the power to end trade fights and resolve the dangers of
Brexit is in the hands of a small number of leaders, so quick decisions could
turn things around before it's too late, Hall said. He predicts these issues to
be dealt with by mid-2020, meaning growth could rebound to 4.2% in 2021.
     For Canada, that means the central bank won't cut interest rates next year,
Hall said. The country's dollar may rise a few cents against the greenback as
business spending picks up and commodity prices climb from their recent lows.
     "We're roughly in step with the U.S. on the interest rate front," Hall
     While Canada's most direct trade risk was Trump's threat to rip up NAFTA,
final ratification of a revised deal by the U.S. Congress won't boost exports
much because of the bigger global tensions, Hall said. U.S. House Speaker Nancy
Pelosi signaled last week Congress may approve the deal soon, but Trump's
approval took most of the uncertainty off the table, Hall said.
     "I'm not sure about the incremental effect of the actual signing of the
deal. Yes there will be some, but if the other issues aren't resolved then there
is a cloud of uncertainty hanging over all of global trade, and Canada is tied
up in that," he said.
     "A recession is pretty much inevitable if we don't have resolution fairly
soon, and that's a global recession."
--MNI Ottawa Bureau; +1 613-314-9647; email:
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