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“The challenge is that we have an economy growing at one to 1.5 per cent right now so we don’t have the buffer room that we might have had a year ago, ” DePratto said. “And if you look at recent business sentiment we were already seeing a softening at the beginning of the year. So we’re laying on a level of shock when a weakening of confidence was already there.”

The U.S. and China currently have tariffs in place covering some US$360 billion in bilateral trade.

A further escalation of trade tensions would have dire consequences for both protagonists and the rest of the world Oxford Economics

Though the current U.S. levies mainly cover Chinese intermediate goods used in U.S. manufacturing, a second tranche covering all Chinese imports would affect more consumer goods like electronics, toys and sporting goods. That might create some new opportunities for Canadian firms to sell into the U.S., said Sal Guatieri, senior economist at BMO Capital Markets.

“But the probability is that will be swamped by the slowing of the economy of our major trading partner and a decline in purchases by consumers,” he said.

Trump’s latest trade measures still leave room for an agreement. Though the new 25 per cent duty applies to more than 5,700 categories of products leaving China after 12:01 a.m. EDT, goods shipped before midnight and arriving in the U.S. prior to June 1 are not subject to the tariffs — suggesting there is still time for a deal to be forged, Hufbauer said.

And with U.S. unemployment below 4 per cent and gross domestic product growing at 3.2 per cent in the first quarter, Trump won’t want to jeopardize the current strength of the economy going into the 2020 presidential elections, he said.

“Right now I think this is a negotiating ploy and there will be a truce in the next couple of weeks,” he said. “Trump doesn’t want to upset the glowing U.S. economy but as always with him, there’s still a chance he’ll go forward.”

• Email: npowell@nationalpost.com | Twitter: Naomi_Powell