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A new analysis of escalating trade disputes involving the United States warns that a deterioration into an all-out, global trade war would knock North America’s economies into a recession.

The report by Scotiabank says if the U.S. breaks all trade ties with its partners, and imposes across-the-board tariffs averaging 20 per cent, then Canada and Mexico would see their economies contract in 2020.

For Canada, it predicts the economy would shrink 1.8 per cent.

Earlier this month, the U.S. imposed new tariffs on steel and aluminum imports from other countries, including Canada, Mexico and the EU — and Washington is now threatening to introduce more duties, this time on automobiles.

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America’s allies, including Canada, have vowed to retaliate with tariffs of their own on U.S. imports.

Then on Friday, U.S. President Donald Trump went further by slapping a 25 per cent tariff on up to $50 billion dollars worth of goods from China.

The tariffs are set to take effect July 6 and would push the world’s two largest economies closer to a full-scale trade war.

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