Columbia Threadneedle: Comment on US-China trade talks
Anthony Willis, Senior Economist, Columbia Threadneedle Investments, comments on the trade talks between the US and China:
'We’ve seen a positive outcome from the trade talks between the US and China over the weekend. While there was an expectation that we would see some movement on tariffs, the substantial reduction, albeit for an initial 90 days, in tariffs between the two countries has surprised to the upside. The US tariff on Chinese imports will drop from 145% to 30%, while the Chinese tariff on US imports falls from 125% to 10%.
There were concerns that the punitive tariffs that have been in place since early last month were starting to impact economic data: it had already been acknowledged by US Treasury Secretary, Scott Bessent, that the situation was unsustainable. However, the levels of pragmatism shown, and the statement this morning that “neither side wants a decoupling” highlights how intertwined the two global economic superpowers remain.
The news flow this morning and last week [the UK ‘deal’] points to tariffs remaining in place, but at a level that will enable President Trump to argue he has taken action to address the US deficit and encourage the onshoring of manufacturing but equally a level that does not significantly impact on the economic trajectory of any country that is willing to engage with the US and come up with a framework to reduce tariffs.
Given that the tariffs have been in place for a limited time, the economic damage should only be superficial. While there will inevitably continue to be uncertainty, this is a positive step. We are seeing a strong rally in risk assets this morning, and we anticipate a further recovery in risk appetite as market participants assess the potential for further ‘trade deals’ for other countries over the coming weeks.'
