As China girds for an escalating trade fight with the U.S., it is facing increasing trouble on the home front from a slowing economy. Spending on so-called fixed assets such as factory machinery and public works projects cooled to the lowest point in nearly two decades, the government reported Tuesday. Other data also pointed to economic challenges. Retail sales grew, but not as sharply as analysts had expected. And unemployment ticked up to 5.1% last month, from 4.8% in June, the National Bureau of Statistics said. Taken together, the data suggest that China can’t go toe-to-toe in retaliating against U.S. trade levies, said Shuang Ding, an economist with Standard Chartered Bank in Hong Kong. “China should avoid adopting a direct, confrontational approach in the trade fight with the U.S. and focus on strengthening its economy first,” Mr. Ding said. The U.S. has imposed 25% tariffs on $34 billion of […]