- We are entering a crucial phase in the US-China trade conflict.
- We see two possible scenarios: (1) negotiations and a 'grand bargain' and (2) Donald Trump strikes back again and we enter a trade war.
- Scenario 1 is the most likely in our view, which should eventually lead to relief in financial markets
'Phase two' of the US-China trade conflict is now over and we are starting to enter more uncharted waters. Both 'Phase one', with tariffs on steel and aluminium, and 'Phase two', with the latest round of Donald Trump tariffs in defence of US technology - and China's retaliation, have been running according to the script that has been laid out by Trump and China over the past seven to eight months. We generally knew from Trump's communication that both these two salves of tariffs were going to come and we also knew from China's messages that there would be retaliation.
The uncertainty is what happens next. The well-signalled plans end here and it is time for the two countries to work their way forward without a script. This also means that we are entering the most crucial phase of the trade conflict, where it is uncertain what happens next. What we know is that there will be a hearing period in the US of at least 30 days and that China has not said when the new measures will be effective.
In general, we see two possible scenarios unfolding from here.
To read the entire report Please click on the pdf File Below: