With the State of the Union address approaching and the budgetary planning process underway, the US is expected to clarify its stance towards China over trade.
President Donald Trump, who has so far employed tough rhetoric on the issue, has the markets questioning the sincerity of his threats. The Trump administration currently faces the decision of whether to impose new tariffs on steel imports, with initial reports on aluminum and solar panels expected this week. The Chinese government is similarly suggesting strong retaliation in the event of a trade war, preparing to take “all necessary measures”.
“The possibility is what we feared last year happens this year,” Michael Spencer, global head of economics at Deutsche Bank AG in Hong Kong, told Bloomberg on Sunday. “Outside of the geopolitical sphere, trade-related fears are probably the biggest external risks we face, since the whole cycle in Asia is currently still very export orientated.”