Whilst markets have reacted in knee jerk fashion to the recent tariff announcement by the US administration, we prefer a more measured approach and our upbeat view for risk assets remains.
By some calculations the recent tariffs on US50bn in goods sounds large (25% tariff rate) the impact on Chinese GDP will actually be rather minimal actually pretty much close to 0% given that China shipped USD505bn in exports to the US last year.
Nothing has taken effect yet and there is a period of consultation (read negotiation). I expect the end game to effectively result in some tariffs on China being imposed and vice versa for the USA but the overall economic impact to be negligible whilst both sides have a victory to take home to their electorates.
- Peter Ahluwalia