Webcast

Our latest monthly economic webcast – recorded in late July – is available here.

Summary

While the news is far from universally good, it does appear to skew heavily in a positive direction.

Positive developments:

• The number of global daily COVID-19 infections may now be peaking.
• COVID-19 fatalities never rose as much as the infection numbers did over the past several months, and may also be peaking.
• The most adversely affected U.S. states are now managing to significantly reduce their daily new infections.
• It appears that the economic recovery continues, and even the U.S. may now be returning to growth after a second wave-related pause.
• Incremental progress continues on vaccines, with betting markets becoming more optimistic about the widespread availability of a vaccine over the first half of 2021.
• Our economic forecasts have been tweaked higher.

Negative developments:

• Continental Europe and a handful of other developed countries now appear to be grappling with a second wave of the virus.
• As this happens, we are reminded that there are still significant limitations as to what economies can do without spiraling out of control.

Virus developments

Globally, the number of new infections per day now appears to be flattening out or even declining slightly, albeit at an extraordinary clip of nearly 300,000 per day. There also appears to be a shift in the fatality trend, though the lag associated with this variable means it could take slightly longer for a downward trend to become indisputable.

Spread of COVID-19 globally

Note: As of 08/10/2020. 7-day moving average of deaths, indexed to 100. Source: ECDC, Macrobond, RBC GAM

Emerging markets

The rate of emerging market infections remains quite high, but may be flattening. In Latin America, Brazil’s daily caseload appears to be in slight decline (see next chart), and possibly that of Mexico, too. Conversely, Peru continues to rise.

Spread of COVID-19 in Brazil

Note: As of 08/10/2020. Source: ECDC, Macrobond, RBC GAM

India has lately been running at around 60,000 new cases per day. While its numbers aren’t falling, they may be starting to flatten out (see next chart).

Spread of COVID-19 in India

Note: As of 08/10/2020. Source: ECDC, Macrobond, RBC GAM

In Africa, South Africa appears to be taming the virus, taking its daily tally down from around 13,000 new cases per day to around 5,000 to 10,000. In Asia, a mini-Chinese wave has since broken.

Developed nations

Meanwhile, in the developed world, the U.S. is looking better but many others are getting worse.

While the U.S. now has a grim total of 5 million cases and over 162,000 deaths, the more relevant news of late is that the country’s transmission rate has happily descended below one, indicating that the virus is now in retreat on a trend basis (see next chart). Whereas the country had previously been recording around 65,000 new infections per day, that figure has now declined to approximately 50,000.

Spread of COVID-19 in the U.S.

Note: As of 08/10/2020. Source: ECDC, Macrobond, RBC GAM

On a regional basis, the tables have turned. Whereas the great majority of U.S. states were suffering a rising trend, only 12 are today (see next chart). Collectively, the states now managing a declining infection rate produce around three-quarters of the country’s GDP. Many previously troubled states have now reported steadily declining new infections, including Texas, Florida, California, Georgia, Ohio, Alabama, and North and South Carolina.

Number of U.S. states with transmission rate above key threshold of one

Note: As of 08/09/2020. Transmission rate calculated as 7-day change of underlying 5-day moving average of new daily cases, smoothed with 7-day moving average. Transmission rate above 1 suggests increasing new daily cases. Includes Washington, D.C.  Source: The COVID Tracking Project, Macrobond, RBC GAM

Two weeks ago, we fretted that some of the other U.S. states that had contained the virus in April had sprung a leak and were beginning to report a rising number of infections. This is still true in some cases, including for Illinois. But several others have since tamed that pernicious trend. We are reasonably confident all will shortly do the same given that the policy prescription is becoming ever-clearer and these states have a history of earlier success.

Canada continues to report positive results, with the country returning to a declining infection trend (see next chart). However, this masks a mixed regional story. Ontario and Quebec continue to improve but several other provinces, including British Columbia, are now slipping in the opposite direction.

Spread of COVID-19 in Canada

Note: As of 08/10/2020. Source: ECDC, Macrobond, RBC GAM

The U.K. infection numbers are edging slightly higher, though are low on an absolute basis. In response, the country has delayed the next step of its reopening.

New challenges

Unfortunately, the continental European countries that had initially driven down the virus to the most impressive extent are now in the midst of a serious second wave of their own. Spain is now recording 4,000 new infections per day (see next chart) – a sharp increase from its earlier clip. France is now up to 2,000 new cases per day. Others such as Germany and Italy have experienced smaller increases.

Spread of COVID-19 in Spain

Note: As of 08/10/2020. Source: ECDC, Macrobond, RBC GAM

Fortunately, these countries seem credibly equipped to control the latest outbreak before it spreads to the same extent as it did in the U.S. Already, most have responded with significant new restrictions. Still, it is disconcerting that these seemingly cautious countries have permitted such a major slip.

Meanwhile, Japan – which never really had a major first wave – is suffering its worst outbreak of the pandemic thus far, with around 2,000 new infections per day (see next chart). While the country seems likely to implement the necessary measures to smother the virus, Japan is undeniably vulnerable given the older age and high density of its population.

Spread of COVID-19 in Japan

Note: As of 08/10/2020. Source: ECDC, Macrobond, RBC GAM

Fatalities versus infections

It remains notable that the world has until recently been suffering from a record number of new COVID-19 infections per day, whereas the fatality figures have remained shy of earlier records. This raises two questions:

1. What explains the difference between the two trends?
2. Does the wedge alter how we should be responding to the pandemic?

Regarding why the two sets of numbers don’t align, there are a mix of optimistic and pessimistic reasons. Optimistic reasons include:

• Older and at-risk people are being infected less frequently than are younger people who enjoy a better prognosis.
• The quality of medical care has increased (greater capacity, new targeted medicines, greater usage of blood thinners and oxygen, more judicious use of ventilators).
• Expanding virus testing has surfaced a larger fraction of those that have been infected, whereas undercounting was not as severe an initial problem for the fatality figures.

Meanwhile a pessimistic explanation is that the fatality figures must by necessity lag the infection numbers, such that the fatality data may yet partially catch up.

All of these explanations have merit. However, we can comfortably conclude that the gap is not merely a function of lead-lag issues. The infection numbers have been setting records for months, whereas the fatality numbers should only lag by several weeks. As such, even after acknowledging that COVID-19 can be most unpleasant even for those who survive its attack, we can reasonably conclude that COVID-19 is a less pressing problem today than it was in April, even though the raw number of infections is higher today.

The second question is whether this should change how COVID-19 is handled. Rather than focusing on the fact that the U.S. is now recording around 50,000 new infections per day, we should arguably be focusing on the 1,500 or so new deaths per day (see next chart), with the caveat that the fatality figures lag the infection numbers and it is not ideal to focus on a lagging indicator.

COVID-19 deaths in the U.S.

Note: As of 08/10/2020. Source: ECDC, Macrobond, RBC GAM

But do 1,500 deaths per day suggest a policy remedy any different than 50,000 infections, or than the 2,500 or so deaths per day that one might otherwise have expected (based on the relationship between infections and deaths that existed in April)? The answer is it probably doesn’t change the policy prescription significantly. The fact that the case fatality rate has fallen makes a stronger argument for pursuing herd immunity via natural means, but not a sufficiently compelling one that it supersedes the dominant strategy of holding the virus in check while pursuing a vaccine.

Further forecast refinements

This pandemic and the resultant unprecedented gyrations in economic activity have not made for easy economic forecasting. We have erred on the side of updating our forecasts too frequently, if anything, rather than be stuck with an indefensibly stale forecast as the virus ebbs and flows, and as new policies and developments come to light.

However, this approach also means we sometimes look foolish, and this is one such occasion. Just two weeks ago we discussed our fresh economic forecasts. Alas, they are already stale. It is not so much that something has radically shifted our expectations for the future. These are largely unchanged, and include the view that the U.S. economy underperformed across the latter part of the summer, and that no economy can fully return to normal until a vaccine or herd immunity is acquired.

Instead, we have gained greater insight into the past. A handful of jurisdictions – prominently, including the U.S. – have now published their second-quarter GDP estimates. For the U.S., the second-quarter economic decline was milder than we had anticipated, at -33% on an annualized basis, versus our assumption of -38%. This is a case of the mobility data and the real-time economic data making a more pessimistic argument than the official economic figures. Incorporating this into our 2020 numbers yielded a less negative figure.

Simultaneously, the greater availability of real-time economic data in the U.S. relative to other jurisdictions meant that we were effectively using a different model for the U.S. than for the other countries. It was theoretically a superior model, but nevertheless not perfectly aligned with the others. This yielded an inconsistency: the mobility data argues that the U.S. economic decline was milder than did the real-time data. We had previously relied on the real-time data exclusively for the U.S., whereas now we do some cross-calibration using mobility measures, too.

All of these tweaks now put U.S. 2020 GDP at -6.0%, a moderate improvement from the last estimate. Canada ends up slightly worse than this, at -7.0%. The Eurozone lands on that same figure. The U.K. continues to lag somewhat. It should be noted that the 2021 outlook is now somewhat more muted than before given our view that the recovery will be a multi-year odyssey rather than an overnight event (see next table).

Note: As at 07/30/2020. Source: RBC GAM

As always, these figures are subject to change. Not only is the timing of a vaccine and the exact amount of economic activity that is tolerable while keeping the virus under control not precisely clear, but the fact that we now know the second-quarter GDP print for several countries is of surprisingly limited help. To be sure, it is a useful input. But the 33% annualized decline in U.S. GDP leaves much to the imagination.

Did GDP drop by 33% on the first day and remain 33% below the prior quarter for the entirety of the three months? Did it fall by 90% in the first month before staging a furious subsequent comeback? By itself, it tells us nothing about how far below normal the economy was as it transitioned from the second quarter into the third quarter. Fortunately, we have the help of higher frequency data as discussed in the next section.

Economic developments

Real-time indicators

The real-time economic data generally reveals a trend of slight improvement, with some countries ceasing to make much progress according to mobility data (see next chart). Canada remains higher than the U.S. according to this measure – a reversal from earlier in the pandemic. That said, at the sub-sovereign level, some states that had been adversely affected by the second wave of the virus, such as Texas, have recently started to log a rising mobility trend again.

Severity of lockdown varies by country

Note: Based on latest data available as of 08/04/2020. Deviation from baseline, normalized to U.S.  Source: Google, University of Oxford, Apple, Macrobond, RBC GAM

A variety of data sources now hint that the U.S. economy is starting to revive after its second-wave pause. For instance, hotel bookings are now rising again after a brief break (see next chart).

U.S. hotel occupancy recovery slowed in latest weeks

Note: For the week ending 08/01/2020. Source: STR, Wall Street Journal, RBC GAM

Our aggregate U.S. economic activity index shows the flat period over the month of July, and hints of a slight revival over the latest week (see next chart).

U.S. economic activity levelling

Note: As of 08/02/2020. Economic Activity Index is the average of 10 high-frequency economic data series measuring the year-over-year percentage change. Source: Bank of America, Goldman Sachs, OpenTable, Macrobond, RBC GAM

Traditional data

Jobless claims support the assertion that the U.S. economy started to inch back toward growth at the very end of July. Initial jobless claims for the final week of the month finally registered an improvement after nearly a month of stagnation. Continuing claims have also improved moderately.

The monthly hiring data largely misses this late-July uptick given that the survey period was between mid-June and mid-July. Nevertheless, the U.S. managed to add a better-than-expected 1.5 million jobs, presumably generated disproportionately in late June, before the temporary malaise set in. This represents a significant deceleration from the 4.8 million jobs added over the prior month. But it is nevertheless a massive figure by any standard other than the pandemic period.

With the latest addition, the U.S. labour market has now restored 42% of the jobs lost to the lockdown. The unemployment rate is improved, but remains in double-digits at 10.2%.

The ISM (Institute for Supply Management) Manufacturing index by itself was not particularly notable for July, though perhaps it is a happy surprise that it managed to increase at all (from 52.6 to 54.2) given the adverse virus trend in the U.S. at the time. Helpfully, a closely watched spread within the measure staged an important improvement: the gap between new orders and inventories more than doubled over the latest month, to +14.5, having been negative not long before. Classically, this spread is around -10 and -20 during a recession, before improving to around +20 during a recovery. It would appear the U.S. economy is well on its way.

Canadian data

Canada’s July employment numbers looked good, up 419K positions – another above-consensus outcome. On a per capita basis, it was also a significantly larger jump than in the U.S., helping to explain how Canada has now restored 55% of the country’s lost jobs in comparison to a 42% recovery in the U.S. A weak aspect of the report was that 82% of the new jobs were merely part-time in nature. The new unemployment rate is 10.9%.

Eurozone GDP

Eurozone second-quarter GDP was also published recently, with a 12% decline. This sounds better than the U.S., but isn’t. Bizarrely, the two use a different calculation technique. The U.S. annualizes its rate of change, while the Eurozone doesn’t. When made comparable, the Eurozone 12% decline becomes a 40% annualized drop – worse than the 33% U.S. decline. This reverses the naïve interpretation, and makes sense: the Eurozone was hit harder than the U.S. in the second quarter. The third quarter, of course, is another story (and one that isn’t yet over, come to think of it, given the recent tentative U.S. improvement and European deterioration in the virus numbers).

Almighty consumer

With June retail sales data now widely available, one remarkable and common theme is the extent to which retail activity has just about fully recovered. Japanese retail sales are now just 1% below February levels, the U.S. is 0.5% below February and the Eurozone is actually slightly ahead of February. Clearly government cheques have worked their magic to keep people spending even during the biggest period of job loss on record.

But not all retailers or consumer-oriented businesses are thriving equally. It goes without saying that tourism, restaurants and the like are still suffering. Meanwhile, credit and debit card data in the U.S. argues that online spending is between two-thirds and 100% higher than normal.

Business cycle turns the page

Every quarter we update our business cycle scorecard. This process took place over the past week. In a sense, the conclusions are less profound than usual as we know with little doubt that the U.S. economy was in recession last quarter and is now beginning to recover. Nevertheless, it is a useful exercise to go through, if only to ensure a complete historical record.

Indeed, the scorecard argued aggressively for a recession last quarter, and now begins to point toward the beginning of a new cycle (see next table). The scorecard functions by considering a wide range of indicators bucketed into different categories. Each indicator gets a vote, and that vote is often split across multiple phases of the cycle when the interpretation proves blurry. When all of these inputs are combined, “Start of cycle” is now the best guess for the business cycle, just edging out “Recession.”

U.S. business cycle scorecard

Note: As at 08/09/2020. Darkness of shading indicates the weight given to each input for each phase of the business cycle. Source: RBC GAM

We should note that some of the indicators still pointing toward a recession are based on quarterly data that has not yet been able to incorporate the rebound after the second quarter of the year. What, then, is the purpose of inputs that so badly lag the true situation? Many indicators begin to turn as much as a few years in front of a traditional business cycle recession, providing useful forewarning.  However, those signals did not fully trigger in advance this time given the exogenous source of this shock.

Providing some colour, the bond market indicator focuses on the fact that yields remain extremely low and that central bank rates are still at rock bottom levels, reaching the conclusion that – under normal conditions – a recession should still be underway. Meanwhile, the equities indicator sees that the stock market has staged a big rebound – normally associated with the start of the cycle if not further into the cycle than that. The employment indicator slightly favours “Start of cycle” given the substantial hiring now taking place – classically not something that happens until a recovery is underway.

Fiscal cliffs

Up until recently, policymakers have been focused on maximizing stimulus and supporting the economy. Monetary policy is expected to remain locked in this position for at least another year. However, fiscal stimulus is quite expensive and so politicians (and eventually bond markets) get jittery when it is left in place for too long. Furthermore, given the generosity of the financial support given to people who lost their jobs, there is not unreasonable concern that some are dis-incented from returning to work (the absence of rapid wage growth suggests this is not too widespread, however). Even if politicians generally believed that an extension of fiscal support is appropriate – as is the case in the U.S. – partisanship can get in the way of delivering that.

All of this is to say that little fiscal cliffs are starting to appear, with the potential to perturb economic activity.

U.S. household support

The U.S. support program for people who lost their jobs provided an extra $600 per week in unemployment benefits above the standard amount through the end of July. Despite considerable efforts to secure a new deal, that has so far proven elusive, with Democrats pitching a $3.5 trillion package and Republicans countering with a different $1 trillion program. The White House has now waded into the fray, issuing an executive order to fund $300 per week in supplementary unemployment benefits, and advising states to pay a further $100. Not coincidentally, the benefits are set to expire a month after the U.S. election.

It is not clear that all states will comply with the federal request, meaning that the fiscal support provided by this program could fall by as much as 50% effective immediately. Some pundits believe Congress may yet manage to pass legislation that secures a different solution, if only to push back at the White House for invading their traditional turf of spending and taxation.

Trump’s executive orders also propose to delay payroll tax collection and federal student loan payments until the New Year. There is also a plan to extend the moratorium on evictions for government-backed mortgages (representing around one-third of renters).

Even with these tweaks, around $10 billion per month in household income support is being eliminated. This should cast an economic shadow.

U.S. states and municipalities

U.S. states also frequently impose a fiscal drag of their own in the years after a recession. This is not so much because they are withdrawing active fiscal stimulus, but because many are beholden to balanced-budget requirements that insist that, as an example, the 29% decline in state revenue through May (on a trend year-over-year basis) must be matched by an equivalent decline in state outlays. Collectively, states and local governments produce 12% of U.S. GDP, so they are far from trivial. The economic rebound thus far is helpful, but deep cuts will still prove necessary.

Canadian expiry

Canada’s equivalent program to support unemployed workers – Canada Emergency Response Benefit or CERB – is also set to expire in the coming months. There is a widespread expectation that the country’s Employment Insurance program will be expanded to fill at least some of the gap. This raises other questions about whether the changes might prove permanent (at least in terms of expanded eligibility, if not more generous payments). It would presumably mean that additional classes of workers would have to pay into the fund going forward.

But Canada’s bigger plan appears to be trying to shift the nature of its worker support program from the U.S.-style unemployment model to the European-style on-payroll model – subsidizing businesses for keeping workers employed. A wage support program already exists but is being modified to allow additional businesses to qualify.

Europe & UK

For the most part, other developed-world jurisdictions have been extending existing programs and so few near-term fiscal cliffs exist there. However, it is unavoidable that fiscal support will start to fade over the next few years, creating a persistent economic headwind.

Second-round damage

Even as economic activity recovers, there remain a variety of second-round considerations that may yet impose headwinds. These are unlikely to induce another recession, but may limit the rate of the rebound over the coming year (see review of main factors in next table).

Watch for moderate second-round economic damage

As at 08/01/2020. Source: RBC GAM

Some of the key considerations include the aforementioned fiscal cliff, the fact that debt problems tend to arise with a considerable lag after a recession, and a bevy of reasons why businesses scale back their spending with a lag even after the recession has ended.

Restaurants and risk

Any number of lists exist that attempt to categorize various activities into different gradations of risk with regard to contracting COVID-19. The Government of Canada has a fairly good one, using “low risk,” “medium risk,” and “high risk” classifications.

Low risk activities

The low risk activities are mostly obvious: getting your mail, driving your car, going for a walk, going to the park, and engaging in low contact sports like tennis or golf. It is perhaps slightly surprising that purchasing restaurant takeout is put in this category, but the risk of virus transmission via inanimate objects is thought to be quite low. Going grocery shopping or retail shopping with sufficient public health measures is also deemed to be of low risk, though one imagines it must be at the very top of the category. In theory, these can be engaged in without much concern, so long as sufficient precautions are used.

Medium risk activities

These include visiting a barbershop, having a medical appointment, staying at a hotel or using a taxi, working in an office or attending school, going to a movie, eating outdoors at a restaurant and visiting at-risk people. In essence, these all involve spending a fair amount of time around a limited number of people, sometimes in an indoor context. People need to weigh the benefit of the activity against the moderate risk it carries.

High risk activities

These include going to bars, gyms, a crowded indoor restaurant (it is unclear where an uncrowded restaurant would be categorized), casinos, indoor parties, cruise ships, large gatherings, travelling on busy public transportation and engaging in high-contact sports such as football and basketball. One would think all of these should not be permitted just yet, and yet several are – and therein lies the risk and perhaps even the reason that many developed jurisdictions are now suffering a rising number of infections. We have fretted about the opening of indoor restaurants, bars and gyms in the past.

This thinking still seems sound, though we must admit to one point of ambiguity. OpenTable restaurant reservations suggest that both Germany and Ireland have succeeded in restoring their restaurant sector to approximately normal operations, without incurring too much trouble (see next chart). Granted, Germany is now starting to suffer a rising number of infections, but less severely than in other major European countries. We are not sure how to reconcile this – it could be that Germany drove the infection to sufficiently low levels that restaurants simply weren’t a major source of transmission. It could be that German restaurants somehow do a better job of distancing. Or it could be that our hypothesis is dead wrong, though everything else seems to line up.

Restaurants around the world reopen for dine-in

Note: As of 07/22/2020. Seated diners from online and phone reservations and walk-ins, based on a sample of restaurants on OpenTable. Source: OpenTable, RBC GAM

Sequencing of crises

Economic crises are never good, but we should perhaps be grateful that the global financial crisis happened a decade ago, as it likely saved us a great deal of grief when COVID-19 arrived on its heels.

For the purposes of this thought experiment, we set aside altogether the question of how the U.S. housing bubble would have resolved without the financial crisis to prick it.

We posit that, without the global financial crisis, policymakers and the banking sector would have been in a much worse position to deal with the economic and financial shocks resulting from COVID-19.

From a policymaker perspective, it is undeniable that the financial crisis ate through some fiscal and monetary capacity that would have been handy to have for COVID-19. However, the more important observation may be that policymakers would almost certainly have been much more tentative initially, tweaking on a much smaller scale and without sufficient urgency, as they did in the early going of the financial crisis. This might have allowed an entirely different financial crisis to erupt alongside the virus-related economic shutdown. Instead, they learned that policy actions must be bold to tame a crisis, and had the necessary tools and experience to do precisely that this time.

With regard to the financial sector, the experiences of the global financial crisis prompted a rethinking of banking over the subsequent decade, resulting in better capitalization, less leverage and less risk-taking overall. And indeed the banks appear to be weathering the COVID-19 shock fairly well (with the caveat that loan losses tend to accrue with a lag).

Brexit update

The U.K. is now scheduled to depart from the European Union in less than five months, and the two parties have not yet managed to negotiate a free-trade agreement.

Across 2020 we have steadily signaled a rising concern that no such deal would be struck, or at a minimum that any deal would prove limited. We now formally increase the likelihood of a No-Deal Brexit to 55%, at least as defined by a free-trade deal (there are other issues that have already been agreed upon, and other smaller items that may yet be). At the same time, we put the prospect of a shallow free-trade agreement at 40%. It goes without saying that the odds of a customs union or a deep free-trade agreement – one that might include a large swath of the service sector, for instance – are now fairly slim, at just 5% collectively (see flowchart).

Brexit final arrangement complicated by COVID-19

Negotiations have not been fruitful, No-Deal Brexit now the most likely scenario

Note: As of 07/31/2020. GDP impact over 15-year span. Source: U.K. Treasury, RBC GAM

A No-Deal Brexit is now in the crosshairs for several reasons. Negotiations have not proven fruitful thus far, and some analysts argue that any deal must be agreed upon by September if it is to be ratified by the end of the year – a tight deadline. Furthermore, the prospect of a hard Brexit no longer creates the same level of fear as it once did now that a much bigger problem is being grappled with. In fact, with isolationism rising globally, a harder Brexit is likely becoming more appealing to the average British voter. Betting markets appear to approximately align with our new views.

Despite having passed the official deadline for requesting an extension and the Conservative Party’s insistence that no extension will be requested, we stubbornly reserve a slim 10% chance that an extension is secured beyond the end of 2020 if either party opts not to pursue this game of chicken to its logical conclusion. Of course, any extension must then be resolved at a later date, and those later outcomes are already reflected in the flowchart above.

While a No-Deal Brexit doesn’t have the same ominous ring that it once did, it is arguably foolish to think that the subject merits less concern than before due to the arrival of a larger shock. Two simultaneous shocks are most certainly worse than one.

Resurgent protectionism

Amid considerable geopolitical strife and a global trend toward isolationism, it perhaps shouldn’t come as a surprise that the U.S. recently announced a new 10% tariff on Canadian aluminum products.

The development nevertheless was surprising, at least to us, because the U.S had earlier lifted its tariff on Canadian aluminum and just a month ago had ushered in a new era of free trade across North America with the activation of the USMCA trade deal on July 1. One might have imagined that if any new tariffs were going to be implemented, they would be between the U.S. and China. The timing is odd as the U.S. already has quite a lot on its plate as it grapples with a second wave of COVID-19, and given its patchy economic recovery, political battles over the aforementioned fiscal cliff and a looming election.

For its part, Canada is now firing back with a tariff on U.S. aluminum products.

These developments are of large consequence to the specific sectors involved, though of limited impact at the economy-wide level. Perhaps the greatest implication is that the U.S. is back on the tariff warpath, with the U.K., Eurozone, Japan and China best advised to be on guard for any further volleys that might be directed in their direction given unresolved trade matters on those shores.

-With contributions from Vivien Lee and Kiki Oyerinde