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Contact usThe gap between China’s nominal exports and imports to the US is the largest ever, as Fig.1. below shows. This is the argument used by President Donald Trump for raising import tariffs on Chinese goods.
While the move has sparked tensions between the two countries, we believe a positive side-effect is that it could well accelerate the opening of China's services sector to overseas participation. China has promised to open its economy further – in particular promising to speed up the pace of ownership reforms for the country’s financial sector with a timeline for implementation of just a few months, which could help avert a trade war.
Source: Pictet Asset Management, CEIC, Datastream, 28.02.2018. *Combined Jan. & Feb. data to adjust for Lunar New Year holiday.
Economist Anjeza Kadilli is just back from Argentina and Brazil where she met with policy makers.
She believes Brazil and Argentina could be the big beneficiaries of the trade tension between the US and China. Both Brazil and Argentina already account for a large part of soybean exports to China. Their share will be even bigger if China decides to stop imports from the US. This new pattern would open opportunities for investors not only in agriculture, but also in related sectors such as manufacturing, infrastructure and machinery.
One obstacle is that Brazil and Argentina currently have the highest import tariffs (14.1% and 14.3% respectively, excluding agricultural products) and are also fairly closed economies (see Fig.2).
Source: Pictet Asset Management, CEIC, Datastream, 31.03.2018
Busy Street scene with neon signs in Hong Kong
Source: MS Research, 2016
30.03.2018
Source: Datastream, Bloomberg, data as at 30.03.2018 and in USD. Equity indices are quoted on a net dividend reinvested basis; bond and commodity indices are quoted on a total return basis. The currency rates evolution is treated as a performance calculation based on FX rates.
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