An analyst believes the tariffs could lead to a significant narrowing of gains in Hong Kong stocks
Published : 04 Feb 2025, 12:35 PM
China on Tuesday slapped tariffs on US imports in a rapid response to new US duties on Chinese goods, renewing a trade war between the world's top two economies as President Donald Trump sought to punish China for not halting the flow of illicit drugs.
Trump's additional 10 percent tariff across all Chinese imports into the US came into effect at 12:01am ET on Tuesday (0501 GMT).
On Monday, Trump suspended his threat of 25 percent tariffs on Mexico and Canada at the last minute, agreeing to a 30-day pause in return for concessions on border and crime enforcement with the two neighbouring countries.
COMMENTS:
NAKA MATSUZAWA, CHIEF MACRO STRATEGIST, NOMURA, TOKYO
"Although it's still highly unpredictable, but you can kind of see through what Trump says and does ... (Mexico and Canada) are not economic rivals, it's part of (the United States') supply chain. So destroying those two economies really does not help the United States. So there was a threat, but what (the US) wants to get from them is perhaps ... some concession on the trade issues or economic issues.
"But on China, it's a totally different story because it's an economic rival as well as political (rival). Cutting off (China) from the supply chain or even economically beat(ing) them is one of the key pillars of the Trump government, so unless China makes huge concessions economically, I really don't think Trump will stop this tariff or (maybe) even just keep going."
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE
"Lack of news of a deal despite the tariff deadline passing, together with latest reports such as China launching a probe on Google and announcing some tariffs on US imports raises the question whether the talks have failed or if we are still simply in the wait-and-see mode.
"While there has been disappointment that a US-China trade deal did not come through before the tariff deadline, markets are clearly overreacting here. This underscores how edgy the markets are amid this uncertainty of tariffs, which creates immense unpredictability for corporates and investors alike.
"My sense is that a deal may still be on the table in the US morning hours, and volatility is likely to persist. The bigger question is if all seems well even if a deal is announced tomorrow and whether volatility will subside – which may be premature to assume in my opinion as the uncertainty is set to linger whether we get a deal or not."
STEVEN LEUNG, DIRECTOR OF INSTITUTIONAL SALES, UOB KAY HIAN, HONG KONG
"When the US tariffs took effect, China launched another tariff - I think it is quite normal. China is trying to get some bargaining power before getting close to the negotiating table. It doesn't mean that they will not go for negotiation talks. Once they agree on a time for trade talks, the market will take it as another positive signal ... it will take some time. There will still be a lot of all these uncertainties and noises over the next few days. I think it's fine for them to create such noises, but just take it easy. Maybe a short selloff- it's just short-term trading. Given this fear people need to be short-term oriented."
JEFF NG, HEAD OF ASIA MACRO STRATEGY, SMBC, SINGAPORE
"The situation is still very fluid. I'm anticipating heightened uncertainty, dollar strength and USDCNH above 7.40."
KENNY NG, STRATEGIST, CHINA EVERBRIGHT SECURITIES INTERNATIONAL, HONG KONG
"China announced an increase in tariffs on some imported goods from the United States, raising market concerns about a worsening trade war between China and the US, leading to a significant narrowing of gains in Hong Kong stocks.
"In the short term, China and the US will engage in consultations, and the related uncertainties may continue to trouble the market. However, as this factor gradually becomes clearer, I believe the investment market is likely to emerge from the shadow of the China-US trade conflict.
"I expect Hong Kong stocks to continue to trend upward with volatility, potentially testing the resistance range of 21,000 to 21,300 within the month."
GARY NG, SENIOR ECONOMIST, NATIXIS, HONG KONG
"Unlike Canada and Mexico, it is clearly harder for the US and China to agree on what Trump demands economically and politically. The previous market optimism on a quick deal still looks uncertain. Even if the two countries can agree on some issues, it is possible to see tariffs being used as a recurrent tool, which can be a key source of market volatility this year. At the same time, China has opted for a more targeted approach in tariffs, export control, and market access restriction, basically flexing its muscles as one of the biggest markets and producers."