A Hong Kong-based fund manager believes a trade deal will be made next year as Donald Trump’s original objective to cut the trade deficit has backfired.
Speaking at a media lunch in Sydney on Friday (20 September), DWS chief investment officer for APAC Sean Taylor said that when it comes to US exports to China, current US trade policy appears to have failed.
“The whole point of having a trade conflict from a US point of view was to basically cut the trade deficit. But it’s not working. The whole objective has gone the other way. This is something that Trump is going to come under a lot of pressure with,” Mr Taylor said.
He expects a “watered down trade deal” will be struck next year.
In August, China exports declined by 15.95 per cent YoY while imports declined 22.28 per cent YoY.
While cutting the trade deficit may have been the official objective, Aberdeen Standard Investments (ASI) global head of emerging market equities Devan Kaloo believes the US-China trade war is fundamentally about protectionism.
“It has now become socially acceptable to put in place protectionism,” Mr Kaloo told Investor Daily.
“That’s what the US-China trade war is all about. What that means is if you are a large economy with a large domestic market, you can start saying to manufacturers, ‘If you want to supply here then you have to manufacture here’. So suddenly there is the ability for countries like India and Brazil to say you really need to manufacture here if you want to supply here, and again that has a beneficial impact for these underlying countries.”
Meanwhile, Mr Taylor from DWS says there has been a lot more positive talk on trade coming out of China.
“Being based in Hong Kong, we are a lot more involved with people who are actually involved in these talks. There is more of an urgency now because China wants to grow. They want to get on with their economic policies and Trump wants to get re-elected,” he said.
“If the democrats get in, they are not going to be friendly to China. They might be even worse. It seems like Trump could be the friendliest and much more likely to get a deal.”