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We might now have ourselves a veritable trade war, as the U.S. and China are set to enact crippling duties on almost $300 billion total in each other’s goods.

Central banks continued to weigh pressures to normalize policy versus cracks in the global economy. And a debate is raging about how long the good times can roll.

Here’s our weekly wrap of what’s going on in the world economy.

Tradewinds Blowing

The U.S. and China announced tariffs on $200 billion and $60 billion in each other’s goods, set to take effect next week and furthering their divide. President Donald Trump is still playing up the potency of the action, while American consumer might be in for a bigger hit and China could cancel talks if the latest round takes hold. It is still looking long-term, eyeing perceived U.S. plans to thwart its rise. China’s holdings of U.S. Treasuries dropped to a six-month low in July, though officials promise the nation won’t weaponize its currency.

In trade-reliant Asia, keep up on five flashpoints to watch, as well as how outflows could make the burn worse for Southeastern economies, according to Bloomberg Economics. On the up side, some industries in the region already are benefiting as companies redirect orders from China.

Read More:

  • Bracing for a Long Fight -- A Compendium of Trade War Analysis
  • The Tough Negotiator Turning Trump’s Trade Bluster Into Reality
  • Chinese Art and Antiquities Spared From Trump Tariffs, For Now
  • Trump’s Early Trade-War Advantage May Be Slipping by the Day
  • CHINA REACT: Trade War Will Be Long Haul, Growth Drag Larger

Central Bank Watch

The Bank of Japan, weighing a high-stakes position as a super-accommodative developed economy, kept its policy stance, which is a big help to Prime Minister Shinzo Abe. Norway, however, took the plunge with the first interest rate increase in seven years. The central bank flagged it will raise again at the start of 2019, even as it unexpectedly lowered its longer term projections. Among those laying the groundwork for eventual policy tightening are Hungary and  Thailand, which both held off this week. Brazil’s central bank, which kept its rate at a record low, is weighing feeble growth and inflation versus a currency sell-off that threatens to boost price growth. In China, the central bank’s headache is a trillion-dollar money-market fund that is boosting borrowing costs and threatens to curb credit flows.

Read More:

  • Powell Fights to Protect the Fed from Trump’s Rate-Hike Barbs
  • Trump Plans to Name Former Fed Economist Nellie Liang to Board
  • INDIA INSIGHT: RBI Continued Hands-Off Approach to Rupee Tumble
  • Coeure Says ECB May Need Clearer Policy Guidance When Rates Rise
  • SNB Treads Carefully as Franc Rally Casts Shadow Over Economy

Zooming Out

For all the global tensions, Goldman Sachs economists are bucking consensus with a call that a U.S. downturn only has a 36 percent chance of occurring in the next three years. Some data in their favor: the world’s richest economies are enjoying their biggest pay raise in a decade. The Fed just sold the last of its Bear Stearns assets, marking the end of an era. Residents of developed countries aren’t so convinced that the good economic times will stick around. And for better or for worse, robots will probably take over half of human work tasks by 2025, according to a World Economic Forum report.

Read More:

  • Emerging Markets, Trade Put a Cloud on Global Economy, OECD Says
  • In the Worker Versus Robot Battle, a Lot Depends on Where You Live
  • U.S. Near Bottom of Health Index, Hong Kong and Singapore at Top

Weekend Reading

  • Hong Kong Cleans Up Typhoon Havoc After Mangkhut Shuts City
  • Why Jeff Bezos Is Rich and British Stores Are Closing Down
  • Only Economist to Call Russia Rate Hike Was Also in for Jolt
  • ECB Tussle for Key Jobs Raises Prospect of Irish Resurrection
  • Dimon Rules Out a Run in 2020, Regrets ‘Machismo’ in Trump Snub
  • U.S. Married Men Earn Much More Than Others: Demographics Trends

Chart of the Week

Swelling Savings Leaves States More Prepared for Next Recession

 

To contact the authors of this story: Michelle Jamrisko in Singapore at mjamrisko@bloomberg.netLucy Meakin in London at lmeakin1@bloomberg.net

To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net

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