While many traders and investors are focused on the US Fed hike cycle, there is a growing concern about the US – China trade war that, at least for now, has paused as US President Donald Trump and President Xi Jinping of China have called for a 90-day ceasefire. Despite some tariffs already set in place, these two leaders would like to see a cooling down period before continuing the war. They did call it a ceasefire, applying a war term to this issue. We at Classiarius feel that this trade war is not just an issue of tariffs, as it is a deep and lasting problem that will take years to solve. The outlook for a resolution remains unclear and the problems in our view are structural. In a recent survey, according to CNBC, Deloitte received 108 responses from a list of company executives who clearly underscore the fall in sentiment in their views on the Chinese economy.
According to this survey, 59 percent of the respondents feel that trade volumes will fall in the next year, while 56 percent had already expected trade to be affected by rising tariffs. Most see trade increasing in the region but China itself seeing a smaller increase in volume. According to some executives there will be opportunities for some countries in the region as manufacturers move production out of China to other areas in the Asia Pacific Region. Despite business sentiment fading, one executive stated that if the US and China reach an agreement and they eventually will, sentiment will of course rebound and improve quickly.