What Happened This Week in the World Economy and What It Means

(Bloomberg) -- The risk of a global trade war may have receded this week as the U.S. and European Union stepped back from a brink.

Tensions between the U.S. and China are nevertheless simmering away, forcing policy makers in Beijing to introduce new ways to support domestic demand.

Here’s our weekly wrap of what happened in the world economy:

Trump Loves EU

Talk of a ceasefire abounded after Trump and European Commission President Jean-Claude Juncker agreed to negotiate lower barriers to transatlantic commerce and put auto tariffs on hold. That was a relief for investors who had worried about how a fight over cars would send shockwaves through the global economy. Meantime, Nafta talks are picked up again with Mexican and Canadian officials sounding optimistic in another sign of a deescalation.

What Happened This Week in the World Economy and What It Means

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U.S. Momentum

The U.S. economy accelerated to a 4.1 percent pace of growth in the second quarter, the fastest since 2014. The uptick was propelled by consumer spending, but economists warned the rate will likely fade. The expansion is a boon for Trump, who called it “amazing” and unlike most economists suggested it was sustainable.

What Happened This Week in the World Economy and What It Means

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China Stimulus

Still in Trump’s crosshairs is China and that battle is showing no signs of letting up. The world’s second-biggest economy may be digging in for a protracted dispute by taking fresh steps to boost local growth. Measures included a tax cut aimed at fostering research spending and special bonds for infrastructure investment. It also increased lending to banks. The actions will though test it drive to contain its debt although Beijing said it had “no desire” to devalue the yuan.

What Happened This Week in the World Economy and What It Means

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Central Banks

Perhaps the week’s biggest news in central banking was Turkey’s decision not to raise interest rate, a heeding of President Recap Tayyip Erdogan’s demands. The European Central Bank, by contrast, provided little in the way of new information although President Mario Draghi will head on vacation welcoming the positive vibe on trade and solid growth. Russia, Hungary, Nigeria, Ghana left interest rates unchanged, while Georgia cut its benchmark. More central banks meet in the next days. The Bank of Japan -- which offered to buy an unlimited amount of bonds twice this week -- is debating how to keep stimulating, yet without generating side effects. The Bank of England is set to raise rates, while the Federal Reserve isn’t expected to shift.

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Weekend Reading

Chart of the Week

What Happened This Week in the World Economy and What It Means

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