Although Southeast Asia’s economies have been diversifying their sources of demand, they are still heavily dependent on external demand, unlike China. But Southeast Asia’s main export markets – US, Japan, and the EU – are all languishing.
The impact on growth, both globally and in Canada, is much larger in the unfavourable scenario than in the favourable one. That underscores how much we all have to lose if the trade war escalates. As for inflation, it actually rises in the unfavourable scenario, even as the economy weakens. That’s because a full-blown trade war would affect supply.