Key takeaways

• The temporary rollback of US tariffs on Chinese imports from 145% to 30% and China tariffs on US goods from 125% to 10% represented a substantial de-escalation of trade tensions.
• We estimate the 30% additional US tariffs will translate into 0.9ppt drag on China’s GDP and expect the 90-day tariff reprieve will likely boost the front-loading of Chinese exports further in the next three months. However, the tariff pause is only a preliminary deal while the upcoming trade talks will likely be a lengthy and bumpy process. Hence, we don’t expect Chinese policymakers to slow down the policy support for domestic consumption and structural reforms to bolster home-grown demand.
• Navigating persistent global trade uncertainty, we stay focused on domestically oriented China’s AI innovation champions, including AI enablers and adopters in the ecommerce, social media, online gaming, software, smartphones, autonomous driving, and robotics sectors. We expect the Chinese market rally to broaden out to the consumption, financial and industrial sectors in the next phase of market re-rating. We remain overweight on Chinese equities, including quality SOEs paying high dividends and remain positive on Chinese hard currency bonds.

Please refer to the full report for details about the event and our investment view.

https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/us-china-tariff-pause-supports-de-escalation-of-trade-tensions/