Analysts at Royal Bank of Canada (RBC) note that the two-step-forward, one-step-back escalation in U.S.-China trade tensions had a one-step-back last week with the Trump administration announcing the 3½-month delay of about 60% of a promised 10% tariff hike on imports from China planned for September 1st. 

• “The move did little if anything to reduce trade uncertainty. And earlier tariff hikes, which disproportionately have been on industrial production inputs, are still in place.
• We expect Canadian manufacturing sales will start to see more negative spill-over effects over the second half of 2019 as well after generally outperforming in data year-to-date through May.  June Canadian exports were quite soft and we expect that will be reflected in a drop in June manufacturing sales being reported next week as well to retrace a big chunk of a surprisingly large May gain.
• But another consequence of rising global trade tensions/growth-concerns has been sharply lower interest rates.
• In Canada, labour shortages are still commonly reported. Wage growth has strengthened. “Core” CPI measures look more likely to tick lower than higher in next week’s July Canadian CPI data, but underlying inflation trends still look like they’re tracking right around the Bank of Canada’s 2% target. And households have looked much less concerned about trade uncertainty than businesses. Consumer confidence is still sitting around cycle-highs in both Canada and the United States.
• In Canada, housing markets have shown clear signs of stabilizing. We expect June Canadian retail sales next week will show a tick higher, once looking through a price-related pullback in gasoline station sales, after a soft May report that looked like it might have been weather-related.  As in other countries, trade uncertainty remains a legitimately concerning downside risk for the Canadian industrial sector and will weigh on economic growth.  Yet near-term headwinds to the household sector are also looking smaller now than they did just a few months ago.”