Xi-Trump talks at G20 unlikely to end trade war, warn Bank of America Merrill Lynch, Barings
- Economists at Merrill Lynch predict negotiations will ‘end in another ceasefire, with both sides delaying additional tariffs’
- Barings is betting against emerging markets and export-reliant Asian countries like South Korea, Taiwan and Singapore
Two major international financial institutions have joined a growing chorus of voices urging investors not to be too optimistic about a significant deal between the US and China being reached this weekend.
Analysts at Bank of America Merrill Lynch and Barings, a global asset manager, said it is unlikely trade tensions between the world’s two largest economies will be fully resolved at a meeting between the countries’ leaders at the Group of 20 summit.
As the trade war uncertainty and its ripple effects on the global economy prevail, Barings is betting against emerging markets and export-reliant Asian countries like South Korea, Taiwan and Singapore, where reports show exports have slumped.
Instead, it recommends defensive investment strategies for the months ahead.
Key decisions to watch for, analysts said, would be whether the US will back down on its threats for the next round of tariffs on an additional US$300 billion of Chinese imports, and whether another truce can be reached.
Chinese President Xi Jinping and his US counterpart Donald Trump are expected to negotiate terms to relieve their trade tensions on the sidelines of the G20 summit in Osaka on June 28 and 29. On the table is the proposed US$300 billion of tariffs on Chinese imports consisting largely of consumer and electronic goods.
“If [the talks] turns sour, then there is a possibility that we could see 5 to 10 per cent tariffs being put on the remaining US$300 billion of exports from China,” said Khiem Do, head of Greater China investments at Barings.
“And in the best case, I don’t know what the best case is. It’s difficult for me to think of a best case at the moment.”