January 22, 2025 at 02:25PM
Chinese stocks were lower today by around 1% after Trump floated a 10% tariffs based on drug exports. I tend to think of the drug/immigration line as a cover for something else because it opens up certain sanctions avenues that moaning about a trade deficit wouldn’t.
In any case, the temperature around a China trade war appears to be falling early in Trump’s term. Certainly there are many companies that would suffer badly (Nike, Amazon and Apple are three) if tariffs rise. China also appears ready to retaliate and that could be giving Trump pause as his instincts say to negotiate instead.
A 10% tariff on China would be easily tolerable and I think it would lead to some relief and upsides to global growth. China stock markets are also in an interesting place, though the biggest ones are more domestically focused. On that front, China today announced it will will steadily increase the proportion of national pension funds’ investment in stock markets.
That’s not the first announcement that’s trying to push domestic savings (which are high) toward stock markets. There is also the National People’s Congress, which will start March 5 and should bring some stimulus announcements. Whether they deliver or not is uncertain but I believe that markets will front-run possible moves. There are also some green shoots in Chinese real estate, though that’s a tough read.
In any case, you can buy Chinese stocks now cheaper than when David Tepper ranted that he was ‘all in’.
This article was written by Adam Button at www.forexlive.com.
