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Oops, He Did It Again!

Published 05/08/2019, 07:01
Updated 09/07/2023, 11:32

Trade talks between China and the US are scheduled to resume later this month, but that didn’t prevent President Trump from announcing a 10% tariff on a further USD 300 billion in Chinese imports, effective 1 September. Equities fell and US Treasury yields collapsed.

Theoretically, the latest round of tariffs could be skipped if trade talks go well, but that seems highly unlikely. Especially since Trump later added that tariffs could go well beyond 25%. In any case, the latest escalation in the trade dispute is negative for risky assets and equity markets. Doubts about future global growth will increase and the expected recovery in the second half of the year will be tested. We have reduced our exposure to equity markets, as China has vowed to take countermeasures. So while the odds of more Fed rate cuts have increased, it’s likely to be a bumpy road until we get there.

10 Yr US Treasury Yield

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