China: Echoes of Japan?

August 13, 2025 8:05 AM UTC

     Overall, some of China’s private businesses and households are suffering from Japan’s style balance sheet recession.  Combined with slowing productivity and a shrinking workforce, this points to slower trend growth in the coming years.  However, fiscal stimulus and the clean-up of Loca

EM Rates: Domestic Fundamentals Dominate

August 7, 2025 9:30 AM UTC

Once trade is agreed with the U.S., the good fundamentals actually argue for a 10yr Mexico-U.S. spread close to 400bps and this is our favored strategic risk reward for big EM government bonds. In Brazil a case can be made for a 12.75% policy rate end 2026 and 10% in 2027, but this could only mean 1

Trump Tougher Posture with Russia

August 4, 2025 8:31 AM UTC

      We suspect that Trump will not follow-through with an across the board secondary sanction on importers of Russia oil, as it would freeze U.S./China trade again and could boost U.S. gasoline prices – high inflation is one main reason for Trump’s softer approval rating.  Trump could agre

Reciprocal Tariffs: Some Hikes, Deals and Delays

August 1, 2025 8:40 AM UTC

 Though high reciprocal tariffs with some countries catches the headline, five of the top 10 countries with large bilateral deficits have reached framework trade deals, two have delays and three have higher tariffs imposed.  With exemptions on some USMCA Canada/Mexico goods, plus phones/ semicondu

China/U.S. Trade Talks Into the Autumn

July 29, 2025 8:20 AM UTC

·        Our baseline (Figure 1) remains that a U.S./China deal will be reached (most likely in Q4), but a moderate probability exists of no deal being done this year and China being stuck with 30% tariffs – the worst-case scenario of still higher tariffs is now less likely with Trump in a

Food Glorious Food

July 28, 2025 10:15 AM UTC

·       Global food prices should see small increases in the future, as production continues to rise broadly in line with increasing demand driven by population and a rising consumption per person in EM countries.  However, China will remain dependent on food imports given it has limited roo

EM Currencies with a USD Downtrend

July 24, 2025 10:15 AM UTC

·       BRL, ZAR and MXN have been helped by FX carry trades and bond inflows on still wide interest rate differentials.  However, actual reciprocal tariff risks are high for all three countries and a wave of profit-taking could be seen.  Elsewhere, though we see a U.S./China trade deal by

Trump Deals: Japan, Philippines and Indonesia

July 23, 2025 8:26 AM UTC

•    Other countries cannot be guaranteed to get a Japan style deal, both as Japan is the key geopolitical ally in the Asia pivot against China and as Trump is keen to agree deals by August 1.  India and Taiwan are trying to finalize deals, but the EU is more difficult.  China 90 day deadlin

Trump’s Tariffs and Markets

July 17, 2025 12:00 PM UTC

The assumption in financial markets is that some trade framework deals will be done by August 1; some countries will make enough progress to be given an extra 30 days and some countries could have higher tariffs implemented. This would be broadly consistent with the average 15% tariff that is widely

China: GDP Resilient in Q2, But

July 15, 2025 7:30 AM UTC

•    We do see H2 weakness relative to H1, as exports to the U.S. will slow again and the effects of the government consumption trade in programs fades.  However, H1 has been higher than our forecasts and thus we are revising 2025 GDP growth to 4.8% v 4.4% previously.  We keep 2026 GDP growt

Tariffs: Seeking a Trigger for the TACO Trade

July 14, 2025 4:28 PM UTC

It has been fairly clear for some time that 10% represented a likely floor for the eventual Trump tariff regime. However, expectations that Trump would not be willing to go dramatically above that are being tested. A rate in the mid-teens still looks the most likely outcome, as the economic damage t

China: Housing Still A Headwind

July 4, 2025 9:00 AM UTC

Last October, China’s government support package has helped turn residential property less negative and our baseline is that residential property will likely deduct around 0.75% from 2025 growth and 0.5% from 2026.  However, the risks for the economy could turnout worse than our baseline view on

U.S. Assets and Valuation

July 3, 2025 9:30 AM UTC

    The U.S. equity market has returned to be clearly overvalued on equity and equity-bond valuations measures and is vulnerable to a new correction in H2 on any moderate bad news (e.g. further economic slowing and corporate earnings downgrades).   In contrast, U.S. Treasuries are at broadly fai

Trump Tariffs: Poker Face?

July 1, 2025 12:55 PM UTC

Our central scenario (but less than 50%) is towards a scenario of compromise, with some agreements in principle or trade framework deals, delays for most other negotiating in good faith but with one or two countries seeing a reciprocal tariff rise e.g. Spain and/or Vietnam.  This could still be fol

U.S. and Asia Defense Partners

June 30, 2025 7:30 AM UTC

 ·        Japan, S Korea and Australia could eventually agree to some extra commitment to increase (self) defence spending in the next 5-10 years though perhaps not targets like NATO countries.  This could come as part of the trade deal negotiations currently underway.  Japan and S Korea

June Outlook: Trump’s Fluid Policies

June 25, 2025 10:00 AM UTC

All chapters of the June Outlook are now available and simply click the link below. 

Outlook Forecasts to download in Excel

June 25, 2025 9:30 AM UTC

Below is an Excel file that contains our headline forecasts for GDP, Inflation, Monetary Policy, and Exchange Rates.

EM FX Outlook: USD Less in Favor, but EM Mixed

June 25, 2025 8:05 AM UTC

•    EM currencies face cross currents on a spot basis.  The USD downtrend against DM currencies can be a positive for undervalued or strong EM currencies.  This could benefit the Brazilian Real (BRL), Mexican Peso (MXN) and Indonesian Rupiah (IDR), though moves will be choppy with occasiona

Outlook Overview: Trump’s Fluid Policies

June 25, 2025 7:20 AM UTC

·       President Donald Trump still wants to use the tariff tool, and we see the eventual average tariff rate being in the 13-15% area, lowered by deals but increased by more product tariffs. Any lasting legal block on reciprocal tariffs will likely see the administration pivoting towards ot

Equities Outlook: Choppy Then 2026 Gains

June 24, 2025 8:15 AM UTC

       Though the U.S. equity market has rebounded, we still scope for a fresh dip H2 2025 to 5500 on the S&P500 as hard data softens further to feed into weaker corporate earnings forecasts and CPI picks up and delays Fed easing.  However, the AI story is still a positive, while share buybacks

China Outlook: Reasonable but Unbalanced Growth Trade

June 20, 2025 7:30 AM UTC

•    China GDP growth remains reasonable though unbalanced.  Net exports will take a hit from the trade freeze in April/May, with the impact likely to ease in H2 with the trade truce.  We attach a 65% probability to a U.S./China reaching a new trade deal that reduces the minimum overall tari

China: Retail Sales Reasonable

June 16, 2025 7:25 AM UTC

•    Retail sales in May was helped by government trade in programs, but the overall retail sales momentum is reasonable.  The industrial production slowdown looks to have been driven by the U.S. tariff chaos in April/May, which has become less adverse after the Geneva trade truce with the U.

China Disinflation Rather than Deflation

June 9, 2025 7:27 AM UTC

May China CPI remains negative Yr/Yr, but the breakdown is consistent with disinflation rather deflation.  Deflation could end up as a drag on the economy, but while growth remains close to the 5% target and CPI is regarded as disinflation rather than deflation, further policy easing will be slow.

Asia Country Risk Ratings

June 5, 2025 10:00 AM UTC

We provide country risk reviews for Asia countries including China, India, Indonesia, Taiwan and Thailand.  

China Banking Problems

June 4, 2025 8:32 AM UTC

China is suffering a credit demand problem from households overexposed to property and private businesses that are cautious.  Meanwhile, the latest IMF banking stress tests shows sections of the banking system remain weak and this is restraining lending.  We remain watchful of money and credit tre

Trump’s 50% Steel And Aluminum: Negotiating Leverage?

June 2, 2025 7:42 AM UTC

•    President Donald Trump increase in steel and aluminum tariffs from 25% to 50% is not just about boosting the steel and aluminum industry.  It also a demonstration that Trump remains in control of tariffs and can aggressively change tariffs to increase negotiating leverage.  It is a mess

Court Stops Trump Reciprocal and Fentanyl Tariff

May 29, 2025 7:18 AM UTC

•    The Trump administration will likely follow a multi-track response by appealing the judgement but also fast-tracking section 232 product tariffs for pharmaceuticals and semiconductors.  The administration could also consider section 301 or 122 tariffs (the latter 15% for 150 days against c

Big EM’s: Cyclical Tariff Hit V Structural Drivers

May 16, 2025 10:00 AM UTC

China, India and Brazil are all seeing cyclical slowdown for varying reasons, with China likely to be hardest hit by adverse net exports due to Trump’s tariff wars. Though financial repression in China can allow further fiscal stimulus, the household sector and residential property investment are

U.S./China Trade Truce Reduce Downside and Extra Stimulus Prospects

May 15, 2025 7:15 AM UTC

The alternative hard landing scenario in China has been reduced significantly with the trade truce with the U.S.  However, China will still have to cope with a minimum 30% overall tariff, with only around a 10% reduction in the fentanyl tariff likely to be agreed in the coming months.  Our baselin

Markets: Less U.S. Recession Risk, But Trade Headwinds

May 13, 2025 9:38 AM UTC

Though we had expected a U.S./China trade truce, the terms are more favorable to U.S. growth than we anticipated.  Combined with the UK framework deal, we have revised down the probability of a U.S. recession from 35% to 20%.  In turn we have revised up the end 2025 and end 2026 S&P500 forecasts t

Trump Tariffs: China and UK Precedents

May 12, 2025 8:02 AM UTC

 The U.S./China have announced major reductions in reciprocal tariffs to 10% with other measures postponed for 90 days.  Though the U.S. is still imposing an extra 20% due to fentanyl, China will likely make some moves that could also help to reduce this.  This is in line with our previous thinki

USD flows: Trump lifts equites and USD, though signals are mixed

May 8, 2025 4:09 PM UTC

The US-UK trade deal is underwhelming, if welcome. Trump’s suggestion that tariffs on China could be lowered if talks scheduled this weekend go well is giving the USD a more significant lift, though Trump continues to give mixed signals, making tariff threats alongside a suggestion that equities b

China Moderate Triple Monetary Easing

May 7, 2025 6:31 AM UTC

•    China has announced a 10bps cut in the 7 day reverse repo rate to 1.4%; large than expected 50bps cut in the RRR rate and credit easing via Yuan1.1trn balance sheet quota expansion to counter the slowdown in growth.  Combined with the extra equity capital for state banks this will help c

Tariff Man

May 6, 2025 8:45 AM UTC

  With the U.S. equity market having rebounded, President Donald Trump instinct on tariffs have seen threats of pharma tariffs and a 100% tariff on non U.S. films. Slow progress is also reported on bilateral deals, despite White House PR spin.  However, Trump will see pressure rising from three so

Markets: China Truce Hopes and More Data

May 5, 2025 8:05 AM UTC

The direction of travel is towards a U.S./China truce followed by postponing/cancelling most reciprocal tariffs and then trade negotiations. While the markets could cheer this as good news, incoming economic data in May and June is the most critical issue.  We still see the U.S. imposing an average

China South China Sea Tensions

April 30, 2025 10:30 AM UTC

We see recent China activity as part of the normal grey warfare for long-term influence in the South China sea.  It has involved the use of China coastguard and militia fishing boats rather than China PLA Navy, though the risk of escalation between the Philippines and China remains. China likely wa

US Exit: Lessons From Brexit?

April 28, 2025 8:05 AM UTC

Overall, the U.S. attempt to reshape global trade is unlikely to significantly improve its trade position, but the size and influence of the U.S. may mean it does not get hit in net exports volumes like the UK.  Even so, U.S. business investment could be restrained by ongoing uncertainty from the T

U.S/China Trade Standoff: Odds Remain Towards Truce

April 25, 2025 7:09 AM UTC

  On balance, our baseline still remains a U.S./China trade deal (55-60%) being reached, given Trump deal instincts; China desire for a deal and the economic disadvantage of an economic cold war to the U.S. when it is trying to reset trade with all countries.  Timeline is Q4 2025 or H1 2026. An al

USD Rebalancing: Some to EM?

April 24, 2025 8:30 AM UTC

Some portfolios rotations towards EM assets will likely be evident, as we see the USD decline is now extending and broadening.  However, flows will likely be selective, both given underwhelming EM performance in the last 5-10 years and the uncertainty over how much Trump will reduce reciprocal tari

Trump Under Pressure

April 23, 2025 7:15 AM UTC

A deteriorating economic; volatile financial markets and weakening approval ratings are all putting pressure on the Trump administration to do trade deals.  However, Trump instincts means he still likes tariffs, while negotiations will not be quick with China restraints and non-tariffs list desired

Foreign Official U.S. Treasury Holders: The Kindness of Strangers

April 22, 2025 7:30 AM UTC

Official holdings of U.S. Treasuries show a mixed picture with China, Brazil and Saudi Arabia well off peak holdings. Two drivers of some of these country flows are the peak in global central bank FX reserve holdings in 2021 and an increased holdings of other currencies in the last decade.  Neverth

Safe Havens Other Than the USD

April 17, 2025 8:30 AM UTC

The USD and U.S. Treasuries are currently not acting like safe havens, as the crisis is U.S. centric with the tariff debacle. 10yr Treasuries can regain safe haven status if a U.S. recession occurs, but U.S. equities are still clearly overvalued versus equity and equity-bond metrics.  We prefer Ind

China GDP: Good Q1 Start, but 2025 Could Be 4.2% or 3.3%

April 16, 2025 8:24 AM UTC

•    The March data releases from China alongside the Q1 GDP figures show a good start for 2025.  However, underlying domestic demand is soft and Q2 will see a big hit from the U.S. tariffs already introduced.  Our baseline (here) remains for a truce in the coming weeks and a scale back of 1

Nervous U.S. Long Term Asset Holders

April 15, 2025 8:30 AM UTC

   Overall, foreign equity investors can no longer count on U.S. exceptionalism and could face lower long-term corporate earnings growth, which at a minimum will likely slow net inflows.  Bond investors also face ongoing policy volatility, which likely means a need for an extra risk premium – t

U.S./China High Stakes Poker

April 14, 2025 7:30 AM UTC

The economic hit from a hard stop in U.S. imports/exports is too damaging for both sides and our baseline is still for a truce and de-escalation, in the coming weeks. This could be negotiations on a new trade deal with a more moderate reciprocal tariff on both sides and the extra reciprocal tariffs

Trade Deals with the U.S.: Pressures and Obstacles

April 10, 2025 7:17 AM UTC

Pressures to do trade deals include the weaker U.S. economy and higher inflation when it arrives/foreigners becoming nervous of their USD30trn plus holdings of U.S. securities and more crucially risks to Trump and GOP approval ratings from Republican voters. Obstacles to quick trade deals include Tr

U.S China Trade War: Deal or No Deal Prospects?

April 9, 2025 9:00 AM UTC

The prospect of a trade deal between the U.S. and China are less and likely delayed into 2026, due to the hardline stance of Trump 2.0 due to the extra focus on tariff tax revenue and shifting production back to the U.S. It is still our baseline that a deal will be agreed though we would now see a d

Reciprocal Tariffs: The Hit To Other Countries

April 8, 2025 9:30 AM UTC

 Overall, we are still assessing the effects on non U.S. countries from the tariffs being imposed by the U.S. via direct trade/business investment/currency and financial & monetary conditions swings.  The impact will be adverse to GDP, but for some major countries could be less than the U.S.  How

U.S. Equities: Hoping for Tariff Negotiations but Fearing Q2 Data

April 7, 2025 9:08 AM UTC

•    The U.S. equity market still remains under pressure from the announcement effect of large reciprocal tariffs, though hopes of trade deals could start to soon produce a stabilization of the market later this week.  Multi month the U.S. equity market outlook depends on whether a recession