China and the US are inching closer to resolving their ‘phoney’ trade war, but progress will “remain slow and uncertain”, according to AMP Capital.
In a note to investors, AMP Capital chief economist Shane Oliver indicated the two superpower states were moving towards something of a resolution to its trade dispute.
On a separate note issued on 13 April, Mr Oliver said the “tit-for-tat” trade tariffs that China and the US were threatening to impose on each other did not amount to a ‘trade war’.
In his latest note, he wrote: “As an act of goodwill (after his phone conversation with President Xi) President Trump tweeted the removal of restrictions on US companies from trading with Chinese company ZTE.
“Chinese Vice Premier Liu … travelled to the US to negotiate on trade and China has offered to accept a US demand for a $200 billion reduction in its trade surplus with the US indicating that it is taking US demands very seriously.”
However, Trump then expressed doubt that a resolution could be reached, but the chief economist said this could be just “a bit of posturing to pressure China”.
“We see a negotiated solution ultimately, but it’s going to be a slow process which won’t be over by the May 21 deadline for the US to finalise its tariffs on China and for the US Treasury to table proposed restrictions on China investing in the US.”
If negotiations seemed promising, the US president could move to delay the tariffs, which are due to kick in on Monday.
“But the risk is high that the tariffs, or at least some of them, could start up for a short period until there is a trade deal, which would not go down well with markets in the weeks ahead,” Mr Oliver added.
He signalled that “issues around President Trump”, along with higher US interest rates, would see volatility stay at high levels in share markets.
“But the medium-term trend in share markets is likely to remain up as global recession is unlikely and earnings growth remains strong globally and solid in Australia,” he said.
“We continue to expect the ASX 200 to reach 6300 by end 2018, and with the ASX 200 now at 6120 it now looks a lot more believable.”
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