China’s economy fell short of expectations and its central bank chose not to follow the Federal Reserve in raising borrowing costs, adding fresh caution on the outlook for global growth as trade tensions with the U.S. escalate.

With President Donald Trump renewing threats to impose tariffs on the world’s second-largest economy, May data for industrial output, retail sales and investment all came in beneath economist forecasts on Thursday. The People’s Bank of China kept the cost of reverse-repurchase agreements steady, defying predictions it would track the Fed’s hike of Wednesday.

Investors now face greater uncertainty over what had been the strongest global upswing since 2011. That doubt is set to fester after Trump said on Wednesday that he’ll confront China “very strongly” over commerce in coming weeks. His administration is scheduled to announce a new list of duties on Friday.

“A slowing China will add to the challenges for the global economy,” said Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong and a former International Monetary Fund researcher. “Until recently, the resilience of growth in China was an important buffer for the global economy in the face of headwinds from trade friction, slower growth in Europe, higher oil prices and issues in various emerging markets.”

Tit-For-Tat

China’s weaker performance comes amid a slew of mixed signals for the global economy. While the IMF sees robust global expansion of 3.9 percent this year and next, Managing Director Christine Lagarde last week warned that clouds on the horizon are getting darker by the day. Topping the worry list are ongoing fears of protracted trade disputes between the U.S. and China, the European Union, Canada and Mexico.

China has promised to retaliate if the U.S. pushes ahead with plans to levy tariffs on $50 billion in imports, threatening an escalating, tit-for-tat trade war. At the same time, rising interest rates have jolted emerging markets, while fears of an Italian debt crisis have returned, along with worries over higher oil prices. A gauge of world trade devised by Oxford Economics Ltd. fell in May to its lowest level since early 2017.

China, which is the world’s second-largest economy, is already slowing after a stronger-than expected start to 2018, even before any new U.S. tariffs on its exports.

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