The direct impact of such a trade war is
unlikely to be large on global growth as the tariff burden will likely be spread across US consumers and
importers, Chinese exporters, and suppliers from other countries who are part of the global supply chain
network. However, the indirect impact via dampened business sentiment and delays in investment could be
large. In addition, a protracted trade war raises risks of disruption or restructuring of the global
supply chain in the coming years and the risk of a broader pullback in global confidence. On the China
side, we estimate that if the tariff burden is evenly distributed between Chinese exporters and US
importers, a full-scale tariff war will drag China’s growth by 1%pt, including a 0.3%pt direct impact via
weaker trade activity and 0.7%pt indirect impact on consumption and investment via the income effect and
hit on business confidence. We expect the Chinese government will react with a modestly larger CNY
depreciation and additional fiscal and monetary policy support to keep growth at 6.1% in 2019 (versus
forecast of 6.6% in 2018) and in the meantime, reduce the growth target in 2019 to a 6%-6.5% range
(versus around 6.5% in 2018). In particular, we expect augmented fiscal deficit will increase by 0.5%pt
of GDP in 2019, TSF growth will bottom up by 1% supported by three 50bp RRR cuts between 4Q18 and 2Q19.
On the US side, we look for the tariffs to reduce US GDP growth by 0.2%pt or less and boost core
inflation by 0.2-0.3%pt, while acknowledging downside risks of larger disruption if business confidence
suffers more than expected. On the other side, the revenues raised by the tariff will help reduce the
2019 forecast of the federal budget deficit from US$1 trillion to US$900 billion.
Trade uncertainty, in particular the US-China leg, is one of the
key overhangs for investor sentiment, but despite this, we are constructive on global equities into year
end. The view is based on a still accommodative DM central bank policy stance, well-behaved credit
markets, robust earnings growth and signs of stabilization in EM/Eurozone activity, in addition to
continued strong US dataflow. On top of this, we find the investor positioning to be much lighter than it
was at the start of the year and equities have experienced a significant multiple compression, of the
order of 10%. Investor complacency has evaporated, with most now fully expecting the trade backdrop to
get worse before it can get any better. The bar for a positive surprise is therefore much lower
currently. EM and China equities have already fallen more than 20% from the January peaks. We had entered
the year with a cautious view on EM equities which was very non-consensus at the time but have upgraded
in the summer. Unlike the expensive valuations in 2015, Shanghai composite P/E is near 15-year lows
currently and Chinese policy response is stepping up. Another key regional tilt we have is to remain OW
US vs European equities within developed markets despite what is an already significant European
underperformance. There is very limited visibility on future trade developments, but we note that the
latest developments on the US-Canada-Mexico trade negotiations were encouraging. Finally, seasonals are
turning positive now for stocks.
Alle Rechte vorbehalten. Nutzung ausschließlich für den privaten Eigenbedarf.
Eine Weiterverwendung und Reproduktion über den persönlichen Gebrauch hinaus ist nicht gestattet.
Kursdaten: Powered by Interactive Data Managed Solutions (IDMS). IDMS und die Datenlieferanten übernehmen keine Gewähr für die Richtigkeit, Vollständigkeit und Aktualität der Inhalte des Informationssystems. Die Kursdaten werden je nach Vereinbarung mit den Börsen/Handelsplätzen in Realtime, 15 Min. verzögert oder End-of-Day dargestellt. Weitere Hinweise entnehmen Sie bitte unseren AGB (§4 Abs.7).