China
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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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
April 3, 2025 4:12 PM UTC
While surprising the market in their intensity, Trump’s “reciprocal” tariffs were in line with previous threats on most countries, and with Canada and Mexico being treated less harshly that feared, the net surprise is modest to us. However we do feel that inflationary risks have increased furt
April 2, 2025 7:05 AM UTC
China grey warfare against Taiwan will continue, but we would only see a 5% probability of China invading Taiwan in 2025 and 2026. The U.S. is pivoting towards Asia and China, while President Trump is not China friendly. A war with the U.S. over Taiwan would be very costly in military and eco
March 31, 2025 9:04 AM UTC
Quick dilutions of tariffs or exemption will likely be slow in coming for countries that the U.S. has trade surpluses with, as the Trump administration are currently more focused on tariffs for tax revenue and trying to switch production back to the U.S. than trade deals. Trade policy uncertainty
March 27, 2025 8:59 AM UTC
The 25% tariffs on cars underlines that tariffs are not just about getting better trade deals, but in Trump’s view raising (tax) revenue and trying to shift production back to the U.S. Combined with other tariffs being implemented, plus policy uncertainty, we see a moderate overall hit from t
March 26, 2025 9:30 AM UTC
· More tariffs will arrive from the U.S. from April with product (car, pharma, semiconductors and lumber) and reciprocal tariffs. President Trump has a 3-part approach to tariffs to raise (tax) revenue; bring production back to the U.S. and get fairer trade deals. This means some of t
March 26, 2025 9:16 AM UTC
EM currencies will be helped by the ongoing USD downtrend against DM currencies, but prospects also depend on relative inflation differentials versus the USD and starting point in terms of valuations. The Brazilian Real (BRL), Mexican Peso (MXN) and Indonesian Rupiah (IDR) should all make modest s
March 26, 2025 9:05 AM UTC
· U.S. trade wars will likely hurt U.S. growth and raise inflation, with only small to modest Fed easing and a 10yr budget bill that will likely be neutral to negative for the economy. With valuations still very high (Figure 1), we see scope for a correction to extend into mid-year th
March 24, 2025 9:00 AM UTC
We look for 4.5% GDP growth in 2025. Though residential property investment will subtract less from GDP growth, net exports will also be a drag on the economy in 2025 due to the trade war with the U.S. Further fiscal stimulus beyond March’s NPC measures will be required to achieve a 5% GD
March 21, 2025 9:00 AM UTC
It appears that we will get bad news from April 2 on extra tariffs before any good news. Firstly, the announcement effect of tariffs for many countries and extra products will hurt U.S. business and consumer sentiment. Secondly, part of the reason for tariffs is extra tax revenue and to try to s
March 17, 2025 9:17 AM UTC
Headline industrial production and retail sales were better than expected, but the breakdown of the data shows a mixed picture for consumption and residential investment remains a negative drag on GDP before the 20% U.S. tariffs hits. Meanwhile, though the weekend policy announcement on boosting d
March 11, 2025 8:45 AM UTC
• The PBOC will likely cut slowly and gradually, as China seeks to avoid Yuan depreciation that could worsen the trade war with the U.S. Additionally, MOF last week forecast nominal GDP of 5%, which with a real GDP target of 5% means that MOF is also forecasting zero inflation. Close to
March 10, 2025 6:04 AM UTC
The Trump administration could decide to more broadly talk the USD down or less likely try to reach a cooperative Mar A Lago accord with big DM and EM countries. A more cohesive alternative is a forced currency deal for countries to appreciate their currencies to avoid more tariffs and withdraw
March 6, 2025 7:55 AM UTC
China announced some fiscal stimulus to help meet the expected 5% GDP target for 2025. Overall, we have not been surprised by the fiscal stimulus measures announced so far from the March NPC, that have been towards the lower end of expectations. However, officials on Thursday have hinted that mo
March 3, 2025 9:02 AM UTC
• Mexico and Canada are trying to frantically find solutions to delay across the board tariffs again, though the U.S. is hinting that the rate could be less than 25%. China extra 10% tariff remains likely, as the U.S. increases trade pressure on China. More tariffs also remain highly
February 28, 2025 9:05 AM UTC
· Trump eventually wants a trade deal with China and this could occur by the end of 2025, but the U.S. will ask for penalties if targets for U.S. imports to China are not met and this will lead to difficult negotiations. Reciprocal and product specific tariffs on China are also likely i
February 25, 2025 9:30 AM UTC
• China is currently reluctant to see Yuan depreciation as it wants to get the U.S. to the negotiating table for a revised phase 1 trade deal and also over concerns about domestic capital outflows. Cuts to the 7-day reverse repo rate are now likely to be in 10bps steps and we look for the
February 24, 2025 8:27 AM UTC
· Our baseline remains of a Russia-friendly peace deal in Ukraine, but this need not lead to a weaker European security situation. This is our baseline (Figure 1), but does require Europe to make concessions to the Trump administration on defence spending increases and trade. However,
February 19, 2025 1:40 PM UTC
· Tariff reality in the spring and summer will likely be both tariff threats to negotiate trade deals and permanently higher tariffs in certain products and reciprocally to raise revenue for the U.S. government – along Peter Navarro guidance to Trump. The macro effects of this cou
February 17, 2025 10:28 AM UTC
· President Trump’s executive order on reciprocal tariffs has not produced much market reaction, both as the proposals will not be delivered to the president until April 1 and the process of Commerce/U.S. Treasury and Homeland Security input is seen reducing the odds of penal tariffs.
February 14, 2025 10:45 AM UTC
Overall, we maintain the view that parts of China’s household sector are showing signs of a balance sheet debt consolidation, due to the excess buildup of debt in the past 20 years relative to disposable income. The non-financial corporate sector is more difficult to interpret, due to strengt
February 11, 2025 1:23 PM UTC
The 25% Steel and Aluminum tariff could have small to modest adverse inflation and GDP growth impacts on the U.S., but the prospect of reciprocal and more product and country tariffs create trade policy uncertainty/supply chain disruption and paperwork problems. This could amplify the impact of
February 10, 2025 7:55 AM UTC
The early days of the new Trump administration has seen lots of volatility around the on-off tariffs with Canada and Mexico, but the more stable U.S. Treasury market has helped provide an anchor. U.S. Treasuries have shift towards the view that the 10yr budget bill will be delayed until H2 and
February 6, 2025 2:30 PM UTC
New U.S. trade deals will likely make slow progress in reducing bilateral trade deficits as the underlying drivers behind the U.S. trade deficit are macro forces. While the U.S. economy outperforms other major trading partners; the value of the USD remains overvalued and as long as tariffs are
February 4, 2025 10:02 AM UTC
China’s targeted and measured counter tariffs against the U.S. are designed to push the U.S. towards the negotiating table on the wider issue of the U.S./China trade deficit. Negotiating will likely start into the spring, but negotiating will be tough as the U.S. wants a phase 2 deal with new ob
February 3, 2025 3:45 PM UTC
While innovation from China’s technology initiatives can provide help to cross over productivity, the benefit will likely only be modest due to the downgrading of the private sector in China and the lack of openness to inward trade. The structural slowdown in capital productivity will dominate
January 23, 2025 2:16 PM UTC
Global markets will be driven by policies and current valuation in 2025, especially new Trump administration policies. Trump could jawbone markets for a lower value of the USD and lower oil prices, which could have a temporary modest impact (joint US/Japan FX intervention is possible) but the stru
January 22, 2025 2:11 PM UTC
· We see the April 1 review of the phase 1 U.S./China trade deal being adverse and President Trump’s carrot and stick approach leading to a 10% rise in tariffs on China imports by the summer. We eventually see a phase 2 U.S./China trade deal being reached in Q4. The main alternative
January 20, 2025 8:15 AM UTC
Brazil debt market has two domestic crises rather than a spillover from the U.S. in the form of inflation and fiscal policy. Very restrictive BCB policy can help produce some disinflation and we forecast 4.1% for 2026, which some allow some rate cuts in H2. Brazil risk premium will likely be reduced