As financial markets pin their hopes on a de-escalation in the US-China trade war, some experts caution that meaningful progress in striking a deal between the world’s two largest economies may still be some way off.
“Either tariffs are cut to more palatable levels or both sides put more exclusions on the table to make tariffs effectively less binding,” Aidan Yao, Amundi’s senior investment strategist for Asia, told the Reuters Global Markets Forum.
“For now, signs of these are sparse, presumably because the pain threshold has not been reached,” Yao said, adding that the outlook for the Chinese economy still looks positive.
China recently said it was “evaluating” a US proposal to resume trade talks over Washington’s 145 per cent tariffs. It has also created a list of US-made products for exemption from its 125 per cent retaliatory tariffs.
Sat Duhra, portfolio manager at Janus Henderson, said, “Trump will need to respond if the threat of a recession increases significantly, which the equity market, dollar and the Treasuries arguably are beginning to point to.”
He said a resolution would benefit his company’s positioning in China.
Duhra has been lapping up Chinese stocks, noting opportunities in banks, technology and sportswear among other sectors, citing higher dividends and lower valuations.
While Janus Henderson is broadly “neutral weight” on Chinese equities, Amundi holds a close to “neutral” stance, preferring domestic-oriented sectors in A-shares and AI-leading tech names in offshore stocks.
China’s blue-chip CSI300 and Shanghai Composite are down 4 per cent and 2 per cent year-to-date, respectively, in line with their US counterparts – S&P 500 and Nasdaq down 3 per cent and 7 per cent, respectively.
“News on tariffs have become mostly noise for the Chinese markets… They don’t set the trend anymore unless a U-turn on Trump’s policies is achieved,” Yao said, adding that China is well-positioned in terms of economic size and domestic policies to cushion the impact of external shocks.
