Chinese equities sold off on Thursday (Hang Seng index –2.0%, CSI 300 –1.9%) and the yuan depreciated past 6.80 versus the US dollar amid continued fears that US President Donald Trump plans to levy higher tariffs on imports of Chinese goods.
Newsflow has been contradictory: President Trump claimed China “broke the deal” it had negotiated with the US, but also tweeted that China were “coming to the US to make a deal”. For its part, China has said it will take “necessary retaliatory measures” if the US raises tariffs on 10 May.
Amid confusing and contradictory reports, it remains highly uncertain whether this week’s trade developments are part of a negotiation process, or the start of a much larger escalation in trade tensions that would threaten global growth.
Our base case remains for a positive outcome to talks, and we continue to believe that the worst case scenario can be avoided. However, this is not certain, and the path to any positive resolution may be a bumpy one.
In our recent report, Be prepared: plan, protect, and grow, and in the latest House View Weekly, we discussed how investors can both protect against near-term risks and position for growth, including through option strategies, portfolio diversification, selectivity in credit, and through growth opportunities in high quality dividend stocks, and in long-term sustainable and thematic opportunities.
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