Sino-US tariffs postponed?
|Trade talks resumed on Monday and appear to be on a good track. Mid-level officials have opened discussions while high-ranked officials should take the lead on Thursday and Friday, including US Trade Representative Robert Lighthizer, US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He. We suspect progress could trigger a Trump–Xi meeting by mid-March with US tariffs being postponed. USD/CNY is currently trading at 6.7798, approaching 6.7745 short-term.
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Consumption in China is at its lowest in 15 years and trade data shows clear signs of weakness. January imports fell 10%, the biggest drop since July 2016. China’s economy could be slowing more sharply than initially thought, although Lunar New Year holidays probably hit January and February activity. The Sino-American trade conflict might be weakening manufacturing and trade figures, but the drop in domestic demand plays a bigger role, forcing authorities to boost domestic demand by reducing import tariffs and providing liquidity stimulus.
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