Trudeau Catches a Dose of Political Flu

(Bloomberg) --

Like summer flu, political scandals tend to come back at inconvenient times.

Just two months before Prime Minister Justin Trudeau seeks re-election, the furor over a graft case involving a Canadian engineering giant has resurfaced.

Ethics Commissioner Mario Dion yesterday ruled that Trudeau sought to pressure his former attorney general last year to help SNC-Lavalin Group settle corruption charges out of court, partly for political reasons. The premier’s actions contravened conflict-of-interest laws, Dion said.

Dion's report undercuts Trudeau’s argument he did nothing wrong and was only seeking to stave off job losses involving SNC, which risked a ban on federal government contracts if found to have committed graft.

Trudeau’s popularity ratings have nudged up after a troubling slide, and he can point to a rebound in economic growth. But while he has won praise for liberal policies on immigration and climate change, bread-and-butter issues are likely to be at the forefront for voters. There's at least some chance he wins a second term for his Liberals but can only muster a minority government.

Conservative leader Andrew Scheer is calling on the police to investigate Trudeau. The challenge for Canada's young leader is to get the scandal off the front pages with speed and his re-election campaign back on message.

Global Headlines

Just In: China threatened unspecified retaliatory measures after accusing the U.S. of violating an understanding between Presidents Donald Trump and Xi Jinping with new 10% tariffs on $300 billion of Chinese goods. The news has spooked global markets.

Alarm bells | The growing odds of a recession before the 2020 election threaten to crush Trump’s hopes of a second term. Such a scenario would be a political gift to Democrats, who have avoided talking about the nearly full employment and low inflation so far in Trump's presidency.

• The S&P 500 sank almost 3% yesterday and the Dow Jones Industrial Average plunged 800 points in its worst rout of the year, sparked when the 10-year Treasury rate slid below the two-year for the first time since 2007, a harbinger of a possible downturn.
• Trump holds a rally today in Manchester, New Hampshire  — where Democrats Bernie Sanders and Elizabeth Warren are campaigning this week  — before returning to his golf resort in New Jersey.

Fraught suggestion | Trump appeared to link Hong Kong’s protests to the U.S.-China trade war in tweets that praised Xi and declared: “Of course China wants to make a trade deal. Let them work humanely with Hong Kong first!” The impact of the crisis was underlined when Hong Kong today cut its 2019 growth forecast to 0%-1% from 2%-3% previously. Beijing’s willingness to tolerate dissent is wearing thin and, with “one country, two systems” due to expire in 2047, the relationship with Hong Kong may go one of three ways, Matthew Campbell reports.

Brexit bargain | U.K. opposition Labour Party leader Jeremy Corbyn asked rival parties to support him as caretaker prime minister in a temporary coalition to block a no-deal Brexit and call an election if they and rebel Conservatives oust Boris Johnson’s government in a no-confidence vote. U.S. House Speaker Nancy Pelosi warned there is “no chance” Congress will pass any future trade deal with the U.K. if Brexit threatens the peace accord in Northern Ireland.

Sinking Argentina | Barring a miracle for incumbent Mauricio Macri, populist rival Alberto Fernández is likely to be elected Argentina’s president in October. They began tentative talks after a market rout sliced 25% off the currency this week amid uncertainty over future economic policy. With the economy sinking, what Fernández may inherit will depend on whether the two leaders can ease default expectations and address the real economy, inflation and savings.

Tight spot | South African President Cyril Ramaphosa’s dependence on labor unions and communists to survive his ruling party’s faction fighting is stymieing his ability to institute reforms needed to revive the economy. As Antony Sguazzin and Nkululeko Ncana explain, business leaders say the dilly-dallying could cost the nation its last remaining investment grade rating at Moody’s, sparking billions of dollars in outflows.

What to Watch

• Israel is considering barring Democratic Representatives Ilhan Omar and Rashida Tlaib from visiting during a trip scheduled to start this weekend.
• South Korean President Moon Jae-in softened criticism of Japan in a speech today marking the anniversary of the end of World War II, fueling hopes the U.S. allies may ease their feud.
• Former Colorado Governor John Hickenlooper is expected to become the first major Democratic candidate to drop out of the presidential race following lackluster fundraising and a mass staff shakeup.

And finally… In the Devonshire countryside, farmer Bryan Griffiths is trying to beat the Brexit clock by putting his 900 sheep on a high-calorie diet. Griffiths has spent money on concentrated feed because he wants them fat enough for sale before Oct. 31 in case Britain leaves the European Union without a deal, closing off the U.K.’s main export market. He wants “to avoid being caught with too many if disaster strikes."

--With assistance from Kathleen Hunter, Karl Maier, Juan Pablo Spinetto, Theophilos Argitis and Karen Leigh.

To contact the editor responsible for this story: Anthony Halpin at thalpin5@bloomberg.net

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