Source: Broker China
Author: Shi Qian
Things may have changed for the better!
US President Donald Trump said on Thursday local time that the tit-for-tat tariff increases between the US and China may be coming to an end. When talking about tariffs at the White House, Trump said, “I don't want tariffs to continue to rise because when they reach a certain level, people won't buy them.” Probably affected by this, international oil prices surged by nearly 3% yesterday, and comprehensive copper also rebounded markedly. This morning, the Asia-Pacific stock market also reacted positively. The Japanese, South Korean, and Australian stock markets all showed good gains. Meanwhile, for the first time in two weeks, traders are betting that the RMB will rise slightly over the next month.
Trump's Hints
According to Reuters, Trump said on Thursday that tit-for-tat tariff increases between the US and China may be coming to an end. When talking about tariffs at the White House, Trump told reporters: “I don't want tariffs to continue to rise because when they reach a certain level, people won't buy them.” “So I probably don't want to set the price higher, or even reach that level. I might want to set the price lower because you want people to buy it, but when the price gets to a certain point, people won't buy it.”
Trump said that since introducing tariffs, China and the US have maintained contacts and are optimistic about reaching an agreement.
Meanwhile, Trump also expressed his views on the agreement with the European Union. According to CCTV news, we learned on April 17 local time that Italian Prime Minister Meroni arrived at the White House to meet with Trump. Trump administration officials said that the two sides are expected to discuss a range of topics during the meeting, including trade, immigration, and ending the conflict in Ukraine. Furthermore, Meloni is expected to put pressure on Trump over trade and tariffs.
Some officials said that Trump “takes this matter very seriously” and that the White House is “ready to reach an agreement.” When a live reporter asked Trump how confident he is in reaching a trade agreement with Italy, Trump said, “I am very confident.” Trump said on the same day that he is “100%” confident of reaching a trade agreement with the European Union before the 90-day tariff suspension period ends.
As the US continues negotiations with various parties on tariff issues recently, Trump said that the US government “is in no hurry” to announce agreements with specific countries, but “at some point” it will announce relevant news.
IMF warning
On the eve of the spring meeting between the International Monetary Fund (IMF) and the World Bank, IMF Managing Director Kristalina Georgieva delivered a speech on Thursday (17th) warning of the Trump administration's tariff policy. She said that the IMF will release the “World Economic Outlook” next Tuesday (April 22), and global trade uncertainty “beyond the scope of the chart” will cause the IMF to drastically cut global economic growth forecasts and also raise the inflation index for some countries.
Kristalina Georgieva said she will not assert that Trump's trade policy will trigger global economic growth for the time being. In the “World Economic Outlook” released by the IMF in mid-January this year, the IMF expects the global economy to reach 3.3% in 2025, roughly the same as 2024 (3.2%), with the US economy now reaching 2.7%.
However, it has been 3 months since Trump took office and has already disrupted the US and the global economy. The Peterson Institute for International Economics predicted earlier this week that the US economy is already only 0.1% this year, far less than 2.5% last year. Kristalina Georgieva said that when all recent tariff increases, suspensions, increases and exemptions are summed up, America's effective tariff rate has jumped to the highest level in generations.
She warned that continued trade policy uncertainty could lead to more financial market pressure events, such as a sharp drop in US stocks. She said, “Despite increased uncertainty, the dollar depreciated, and US Treasury bonds sincerely 'smiled' — this is not the kind of smile people want to see. These expressions should be viewed as a warning sign; if the financial environment deteriorates, everyone will suffer.”
Kristalina Georgieva is the latest heavyweight this week to express concerns about Trump's trade policies. World Bank President Anjie Peng and Federal Reserve Chairman Powell both warned against possible stubbornness caused by Trump. The European Central Bank (ECB) also lowered interest rates on Thursday and warned that trade tensions have intensified and economic growth prospects have deteriorated.
The market's reaction
Last night, the reaction of US stocks to Trump's new statement was rather lackluster. In this process, one thing is also worth paying attention to. Although the trend of US stocks and US bonds has been weak recently, the data released last night shows that the Fed's downsizing trend does not seem to have changed.
In early trading today, the Asia Pacific stock index performed well, showing that the market's concerns about tariffs have eased. At the same time, the performance of commodity futures was also quite prominent. The rebound in international oil prices and non-ferrous metals such as copper and tin is also very obvious.
In the foreign exchange market, the yen continued to rise, while the RMB also experienced an expected rebound. According to some sources, for the first time in two weeks, traders are betting that the RMB will rise slightly within the next month. 1 month term$USD/CNH (USDCNH.FX)$The risk reversal indicator entered the negative zone for the first time since April 2, at -0.05% on Thursday, indicating that put options had the upper hand. The indicator once hit 1.18% on April 9. Traders are currently paying a higher price for a put option to bet on a lower USD/offshore renminbi than the price of a call option. The opposite has been the case in the past few weeks, when the premium of a call option over a put option continued to expand.
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