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STRATEGIC ASSESSMENT INTERNATIONAL-The start of a trade war between the United States and China comes at an inconvenient time for the Chinese economy. In recent weeks, concerns have been mounting that growth in the world’s second-biggest economy is cooling faster than previously expected. Weaker Chinese growth will have repercussions for big trading partners, such as the United States and Europe, and for global companies who do business there.

Now, an intensifying clash with the United States is adding to the difficulties. Both sides announced tariffs on $50 billion of each other’s products last week, and President Donald Trump upped the ante further on Monday with a threat to impose duties on at least another $200 billion of Chinese goods.

The Chinese economy performed strongly last year, growing 6.9%, according to government figures. That momentum continued into the start of this year, but many economists were skeptical it would hold. Signs of a slowdown are starting to appear. Official economic data for last month showed that growth in important areas like exports, investments by companies and consumer spending all declined compared with the same month a year ago.

China’s economy will grow 6.4% this year, or slightly below the Chinese government’s growth target for of about 6.5%. Some analysts have repeatedly questioned the accuracy of official GDP data. The deepening trade fight with the United States is likely to contribute to the loss of momentum.

Haibin Zhu, chief China economist at JPMorgan, estimates that US tariffs on Chinese exports could slice between 0.1 and 0.5 percentage points off Chinese economic growth, depending on the scale and intensity of the tariffs. The fallout may spread beyond the direct impact of tariffs, too, hurting business confidence and delaying investment decisions in the country, Zhu added. “Economic growth appears likely to weaken further over the second half of the year,” said Capital Economics’ Williams.

Some economists say a key reason for the apparent slowdown is the Chinese government’s push to rein in the huge levels of debt in the country, which have risen sharply since the global financial crisis a decade ago.

By the middle of last year, debt was more than two and a half times the value of the entire Chinese economy, according to the Bank of International Settlements. Ratings agencies Moody’s and S&P last year downgraded China’s credit rating.

Xi and other top officials have talked about reducing risks in China’s financial system, which is often referred to as “deleveraging.” They have also tried to crack down on China’s huge shadow banking sector in which murky forms of lending are kept off banks’ official balance sheets. Analysts have been skeptical of the government efforts to get a handle on debt, but some now say the measures have become more meaningful and are starting to weigh on growth. A trade war could throw a wrench in the works. If waves of US tariffs start to damage the economy, analysts say Chinese policymakers may drop the efforts to tackle risky lending and return to old habits. “China’s leaders will feel confident that they have the ability to loosen policy to cushion the blow if needed,” Williams said. “China is good at economic stimulus.”

Following the latest US trade threats this week, People’s Bank of China Governor Yi Gang told state-run media that “China is in good position to cope with all kinds of trade frictions.” Some analysts have stressed that there are still bright spots in the Chinese economy. Betty Wang, senior China economist at Australian bank ANZ, points out that manufacturing and real estate — two big economic growth engines — are still doing well.

“There are some positive signs in the economy, which prevent us from being overly pessimistic about the economic outlook,” Wang said.

There’s a lot to worry about: Economists warn that trade fights, geopolitical tensions, rising oil prices and emerging market crises could take a major bite out of growth.  “The global economy started the year in relatively good shape. Unfortunately, the outlook [has] clouded,” said Chris Scicluna, head of economic research at Daiwa Capital Markets. Economic risks promise to be a major topic of conversation at the upcoming G7 summit in Canada. Here’s what experts are most worried about trade war.

President Donald Trump has slapped tariffs on imports including steel, aluminum, washing machines and solar panels. Canada, Mexico, China and the European Union are retaliating. Experts say the economic impact from the new tariffs has so far been limited, but the pain could increase dramatically if a cycle of retaliation takes hold.

If political leaders follow through on their most dramatic trade threats, including US tariffs of 25% on $100 billion in Chinese goods, Barclays estimates that a full percentage point could be knocked off global economic growth next year. The World Bank is currently forecasting 3% expansion for 2019. Kallum Pickering, a senior economist at Berenberg bank, said that geopolitical risk is now at its highest level since the early 2000s. “The current global upswing depends on continued global trade growth — the two are closely linked,” he said in a research note. “A threat to trade, and hence economic growth, is a threat to markets.” Senior policymakers are calling on political leaders to reduce tensions, and quickly. “Protectionism is rising everywhere … and it’s important at the international level that this is addressed,” Swiss National Bank Governor Thomas Jordan told CNNMoney Switzerland on Thursday.

The immediate risk of another eurozone crisis has faded, but investors are still worried about Italy. “We surely haven’t heard the last of the Italian crisis as the new government challenges the European Union,” said Kit Juckes, a strategist at Societe Generale.

Economists are wary of the new government in Rome, which has big spending plans. A clash with EU fiscal rules could come later this year when the government presents its budget. Investors are already demanding higher interest rates to lend the heavily-indebted nation money. “The new government’s commitment to the euro is questionable,” said Jack Allen, European economist at Capital Economics. A new crisis could result in contagion, hurting business confidence and slowing investment in the eurozone, where growth cooled in the first quarter.

Investors have been attracted to the United States because of rising stocks and bond yields, and a stronger dollar. That’s causing money to rush out of emerging markets, where currencies including the Argentine peso and Turkish lira have been under major pressure. Brazil’s currency is down 19% from its recent peak in January.

Economists expect the trend to continue as the US Federal Reserve hikes interest rates.  Central banks in emerging markets have been forced to hike rates to prevent their currencies from sliding too far. Turkey’s central bank hiked interest rates again this week to nearly 18%. Rates in Argentina, which agreed a $50 billion bailout with the IMF on Thursday, stand at 40%. Economists say Brazil could be the next major problem spot.

Oil prices surged to their highest level in over three years last month, leading to concerns that businesses and consumers would have to cut back on spending in other areas to pay for higher energy costs. One sign of pain: India, the world’s third largest energy consumer, sought assurances from Saudi Arabia, the world’s largest oil exporter, that prices would remain “stable and moderate.” Oil prices retreated after major producers said they would consider pumping more to ease supply and price concerns. US crude oil is now trading around $66 per barrel.

For some, the damage had already been done: India’s central bank hiked interest rates this week, citing a recent spike in oil prices as one of the main factors in its decision.

Much will depend on whether OPEC and Russia agree to raise production at a meeting in Vienna on June 22.  Let’s make something perfectly clear. There are no winners in a trade war. That’s why global stock markets were nosediving Tuesday. But as tariff tension between the United States and China escalates there may be some places in the market where investors can hide and ride out the storm.

Investors flocked to US bonds, which are still viewed as some of the most stable assets in the world, despite all the political turmoil. The yield on the benchmark 10-Year Treasury, which moves in the opposite direction of prices, fell Tuesday as investors bought more of Uncle Sam’s debt. Yield for other shorter and longer term bonds also dipped Tuesday.

The US dollar also gained ground, but the price of gold fell Tuesday along with the broader market. Many investors view gold as a safe haven, because it’s a physical commodity tied to supply and demand — not the whims of global central banks, Investors don’t need to limit themselves to bonds, commodities and currencies. Experts said there are some stocks that might hold up during the tumultuous times as well. The dip in US bond yields could make dividend-paying stocks more attractive to investors seeking the security of fixed income.

To that end, Verizon (VZ) — which pays a dividend that yields 4.9% — was up nearly 2% Tuesday even as the Dow fell 400 points. Utilities and real estate investment trusts, sectors that also pay big dividends, were holding up well Tuesday too.

The rest of the market wasn’t doing so well. But Tom Essaye, founder of investment research firm The Sevens Report, said in his daily market newsletter Tuesday that investors should still focus on companies with a lot of exposure to the US economy.

“If trade wars do escalate, the entire market is going to come under pressure, but even in the “Ugly” scenario, sectors with a domestic US focus should at least relatively outperform the broad market,” he wrote.

Regional banks should fare better than multinational banking giants like JPMorgan Chase (JPM) and Citigroup (C), Essaye says. He recommends the SPDR S&P Regional Bank ETF (KRE). Top holdings include Cleveland’s KeyCorp (KEY), Memphis-based First Horizon (FHN) and M&T Bank (MTB), which is headquartered in Buffalo.

Essaye also said that US homebuilders like Toll Brothers (TOL), Lennar (LEN) and Hovnanian (HOV) could hold up better than the overall market too. So could US-focused oil companies in the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Smaller US companies, which tend to have less international exposure, could fare well even as fears of a trade war on multiple fronts increase.

That’s a key reason why the Russell 2000, an index that focuses on small domestic stocks, actually rose on Monday and was down less than the broader market Tuesday. The Russell 2000 is up 10% this year, while the Dow is now in the red for 2018. And one analyst even thinks that big tech stocks like Apple (AAPL), Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google owner Alphabet (GOOGL), which have continued to surge this year, may still be save havens even amidst all the bluster about tariffs and trade wars.

Daniel Ives, head of technology research for GBH Insights, said in a report that the news of an additional $200 billion in tariffs on Chinese goods “is a scary headline that we continue to believe will ultimately will have minimal financial impact to Apple, FANG, and other tech names despite retaliation worries.” Why? Ives argues that Apple is in a good position because of its relationship with Chinese contract manufacturer Foxconn, which builds iPhones for the company. Ives does not think the Chinese government wants to risk hurting Foxconn by punishing Apple. “Given the tightly woven integration between Apple and Foxconn in China, we believe there is minimal risk to this relationship,” Ives wrote.

As for the FANG stocks, Ives thinks that they are “primarily insulated” by any trade war fears, mainly because Facebook, Amazon, Netflix and Google don’t have that large of a presence in China. They are more services-oriented than manufacturers.  It’s harder to slap a tariff on an ad-dependent social network or streaming media TV service than it is to impose tariffs on cars, planes and food (