Controversy surrounded Theresa May and the subsequent Brexit White Paper. This received a hostile reception from pro-Brexit MPs in Parliament. The paper was widely seen as softening some of the government’s previous red lines, sparking the resignations of Davis, Johnson and three junior ministers, and a week of political turmoil. This will likely go down as one of the biggest political shambles in modern history, and possibly only a fresh referendum will clear the stalemate.
The UK economy expanded by 0.2 per cent, in the three months to the end of May. Services was the only positive contributor to GDP growth, while both manufacturing and construction sectors contracted. The long-awaited bounce back has failed to materialise after a weak Q1. The figures hardly make a compelling case for an August rate rise, particularly as Brexit uncertainty continues to cast an increasingly threatening shadow.
Trade war fears continued to dominate markets, as US President Donald Trump announced potential further tariffs on $200bn of imports from China. These proposals will not come into effect for some time, as there is a legal consultation process that will run through July and August. However, positive US jobs data helped to reassure investors and equity markets ended the market in positive territory.
In response to trade wars, China appeared to switch strategy by seeking allies in Europe, Asia and within America itself. This time, however, China has cautiously parried the US measures as it seeks instead to present itself as an attractive investment destination, while President Donald Trump’s administration pressed ahead with tariffs on $34bn in goods. China’s trade surplus with the US limits its ability to impose tit-for-tat tariffs. When dealing with the US, it is clear that China is more vulnerable and so that forces them to take a different approach.
China’s economy expanded by 6.7 per cent in the second quarter, its slowest pace since 2016, as the impact of an aggressive deleveraging campaign curtailed investment in infrastructure. However, growth in China’s exports beat expectations in June, with the dollar value of goods sold abroad up 11.3 per cent year-on-year. Imports increased 14.1 per cent, below expectations of 20.8 per cent. Finally, Electric vehicle producer Tesla said it will build its first factory outside the US in Shanghai. China is the world’s number one electric vehicle market.
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