US: Trade war resulting in slower earnings growth - NBF

China announced last Saturday that it would retaliate tit-for-tat (same amounts and same dates) if the U.S. follows through on its decision to impose tariffs on $50 billion worth of Chinese imports, notes the research team at NBF.

Key Quotes

“President Trump threatened last week to impose tariffs on an additional $100 billion of Chinese imports if Beijing retaliated. In addition to tariffs, Washington is also set to release a June 30 proposal to limit Chinese investment in the United States unless Beijing agrees to ease investment restrictions for American investment in China.”

“The trade spat would be quite manageable for the global economy were it not for Mr. Trump’s threat to target another $100 billion of Chinese products if Beijing does indeed levy tariffs on U.S. products on July 6.”

“So it’s getting a lot more complicated on the geopolitical front at a time where the Federal Reserve is still inclined to hike a few more times in 2018 despite a stronger USD. This is a combination that could pose a challenge to earnings growth and equity markets given that PE expansion is very hard to come by at this point in the economic cycle. The bottom-up consensus of equity analysts sees earnings rising a robust 14.6% over the coming year.”