Latest news with #Gavekal
Yahoo
13-05-2025
- Business
- Yahoo
U.S.-China tariff truce offers relief — and plenty of uncertainty
A tariff truce between the U.S. and China announced on Monday will offer companies some relief, but also prolong the kind of economic uncertainty that makes it hard for businesses to plan for the future. Beginning May 14, the U.S. will lower its maximum tariff rate on Chinese imports from 145% to 30%, including a 10% baseline levy plus a fentanyl-specific 20% levy. China will reduce its 125% tariff on American goods to 10%. But clinching a long-term trade deal is likely to prove challenging, while the reduced 30% tariff rate could still lead to price hikes for consumers, experts told CBS MoneyWatch. "It remains to be seen whether the U.S. and China can agree to a trade deal that keeps tariffs from rebounding in 90 days," analysts with Gavekal, an investment research firm, said in a report. "So far, only the U.K. has reached an agreement with the U.S., and that doesn't tell us much." Is the 30% tariff permanent? No. Absent a formal trade deal, there's no guarantee that President Trump won't again raise tariffs on China once the truce expires after 90 days and that Beijing won't also retaliate. U.S. Treasury Secretary Scott Bessent called the new baseline tariff a "floor" in an interview with Bloomberg Surveillance. "This is just a 90-day pause that allows the two countries to work toward a deal," supply-chain expert Sina Golara, an assistant professor at Georgia State University's Robinson College of Business, told CBS MoneyWatch. Is a 30% tariff on Chinese imports still high? Under the agreement, the U.S. will lower tariffs on Chinese goods from as much as 145% to 30%. Still, that represents a steep hike on the level of U.S. levies on China before Mr. Trump took office. "If you look at where we were pre-'Liberation Day' or when Trump took office, this 'agreement' is just a baseline tariff increase to 30% across the board," said Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a left-leaning public policy think tank, referring to the phrase President Trump used in announcing a barrage of tariffs on April 2. "While it's a walk-back from the prohibitive 145% tariffs, it still leaves us no closer to any concessions or renegotiations vis-à-vis China than we were." Tariff rates aren't the only potential sticking points as the countries continue to negotiate. "The two countries have a lot of grievances in many dimensions, so it's not just tariff rates," Golara noted. "It's where they strand on other trade barriers, the trade imbalance, and the U.S. accusing China of currency manipulation, so there's a lot to discuss. It makes sense for them to want to take more time." What does the U.S-China truce mean for economic growth? There's good news here: If both countries' reduced tariffs remain in place, consumer confidence is likely to improve and boost spending. That should help contain U.S. inflation and help support the job market, according to Oxford Economics associate economist Grace Zwemmer. The announcement also reduces the odds of the U.S. economy entering a recession this year, according to experts. Oxford Economics chief U.S. economist Ryan Sweet lowered his forecast for a recession to 35% from more than 50%. Will shipments from China start flowing again? Large and small businesses alike in the U.S. have warned that higher tariffs will raise consumer prices, while some companies have canceled orders from Chinese factories because of the high levies. "It's very clear that Trump was staring down the barrel of a huge drop in imports from China across the busiest shipping season, as companies build inventory for Christmas and the holiday season," Groundwork Collaborative's Jacquez told CBS MoneyWatch. "There were more announcements from companies about burning through their inventory and having to pass costs to customers, or having to cease importing from China." Freight shipments from China are expected to surge during the 90-day tariff pause, as companies bulk up their inventories to guard against the trade talks foundering and levies rising. As a result, shipping rates will rise, and squeeze smaller businesses, whose margins are already thin. "Right now, you'll see a huge rush in trying to get imports in from China in this 90-day period. That will strain shipping logistics just as it did in Covid, when everything opened back up," Jacquez said. Will consumer prices still rise? Businesses still face added costs with 30% tariffs in place, and they are likely to pass some of those expense onto consumers. But the price hikes could be less substantial depending on how companies handle tariffs, according to Georgia State University's Golara. "If we have a mix of some companies handling tariffs well, we won't see broad-based inflation rise to a painful level. We might see pocketed effects in different and specific products and sectors," he said. Other experts agree the pause is good news for companies and consumers. "The tariffs were so punishing that it was creating this incentive not to import anything from China," Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University told CBS MoneyWatch. "The announcement is also good news because it means supply is not going to be as restrained as it was." It doesn't mean the U.S. it completely out of the woods, though. "It's still a significant increase in taxes for American consumers. We are still in a worse position than we were," de Rugy said. How are companies reacting? Businesses are still grappling with significant economic uncertainty, making it hard to plan for the future. "If you're a small business and don't know what your inputs will cost next week or in 90 days, it's going to be extremely difficult to do business in this uncertain environment," Jacquez said. Kim Vaccarella, founder and CEO of Bogg, a U.S-based beach bag and accessories company that makes its products in China, has been scrambling to shift at least some of its manufacturing to Vietnam and Sri Lanka because of the Trump administration's stepped-up tariffs. "We were looking at alternatives and set up viable sources in both countries, and we were working toward manufacturing there," she told CBS MoneyWatch. Then came The White House's announcement on Monday. With the U.S. earlier this year having raised its country-based tariffs on Vietnam and Sri Lanka to o46% and 44%, respectively, China may again be Vaccarella's best option. "Now we are back to square one, because at 30% it's less expensive to manufacture in China," she said. "If tariffs stay at 30% or go lower, it just looks like we spent a lot of money quickly trying to ramp up production somewhere else, because that would have been more acceptable under this current nightmare." A leading index of small business optimism has fallen every month this year, although it remains above its levels before the November presidential election. Vaccarella had warned customers that the price of her company's bags could jump as early as July. "But 30% we can work with," she said. "There might have to be a small increase, but it won't be what it would have been at 145%." New inflation data shows first effects of Trump's tariffs Darren Criss lands two Tony nods for robot romance musical, "Maybe Happy Ending" Prabal Gurung shares personal journey in new memoir, "Walk Like a Girl"
CBS News
13-05-2025
- Business
- CBS News
U.S.-China tariff truce offers temporary relief — and plenty of uncertainty
A tariff truce between the U.S. and China announced on Monday will offer companies some relief, but also prolong the kind of economic uncertainty that makes it hard for businesses to plan for the future. Beginning May 14, the U.S. will lower its maximum tariff rate on Chinese imports from 145% to 30%, including a 10% baseline levy plus a fentanyl-specific 20% levy. China will reduce its 125% tariff on American goods to 10%. But clinching a long-term trade deal is likely to prove challenging, while the reduced 30% tariff rate could still lead to price hikes for consumers, experts told CBS MoneyWatch. "It remains to be seen whether the U.S. and China can agree to a trade deal that keeps tariffs from rebounding in 90 days," analysts with Gavekal, an investment research firm, said in a report. "So far, only the U.K. has reached an agreement with the U.S., and that doesn't tell us much." Is the 30% tariff permanent? No. Absent a formal trade deal, there's no guarantee that President Trump won't again raise tariffs on China once the truce expires after 90 days and that Beijing won't also retaliate. U.S. Treasury Secretary Scott Bessent called the new baseline tariff a "floor" in an interview with Bloomberg Surveillance. "This is just a 90-day pause that allows the two countries to work toward a deal," supply-chain expert Sina Golara, an assistant professor at Georgia State University's Robinson College of Business, told CBS MoneyWatch. Is a 30% tariff on Chinese imports still high? Under the agreement, the U.S. will lower tariffs on Chinese goods from as much as 145% to 30%. Still, that represents a steep hike on the level of U.S. levies on China before Mr. Trump took office. "If you look at where we were pre-'Liberation Day' or when Trump took office, this 'agreement' is just a baseline tariff increase to 30% across the board," said Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a left-leaning public policy think tank, referring to the phrase President Trump used in announcing a barrage of tariffs on April 2. "While it's a walk-back from the prohibitive 145% tariffs, it still leaves us no closer to any concessions or renegotiations vis-à-vis China than we were." Tariff rates aren't the only potential sticking points as the countries continue to negotiate. "The two countries have a lot of grievances in many dimensions, so it's not just tariff rates," Golara noted. "It's where they strand on other trade barriers, the trade imbalance, and the U.S. accusing China of currency manipulation, so there's a lot to discuss. It makes sense for them to want to take more time." What does the U.S-China truce mean for economic growth? There's good news here: If both countries' reduced tariffs remain in place, consumer confidence is likely to improve and boost spending. That should help contain U.S. inflation and help support the job market, according to Oxford Economics associate economist Grace Zwemmer. The announcement also reduces the odds of the U.S. economy entering a recession this year, according to experts. Oxford Economics chief U.S. economist Ryan Sweet lowered his forecast for a recession to 35% from more than 50%. Will shipments from China start flowing again? Large and small businesses alike in the U.S. have warned that higher tariffs will raise consumer prices, while some companies have canceled orders from Chinese factories because of the high levies. "It's very clear that Trump was staring down the barrel of a huge drop in imports from China across the busiest shipping season, as companies build inventory for Christmas and the holiday season," Groundwork Collaborative's Jacquez told CBS MoneyWatch. "There were more announcements from companies about burning through their inventory and having to pass costs to customers, or having to cease importing from China." Freight shipments from China are expected to surge during the 90-day tariff pause, as companies bulk up their inventories to guard against the trade talks foundering and levies rising. As a result, shipping rates will rise, and squeeze smaller businesses, whose margins are already thin. "Right now, you'll see a huge rush in trying to get imports in from China in this 90-day period. That will strain shipping logistics just as it did in Covid, when everything opened back up," Jacquez said. Will consumer prices still rise? Businesses still face added costs with 30% tariffs in place, and they are likely to pass some of those expense onto consumers. But the price hikes could be less substantial depending on how companies handle tariffs, according to Georgia State University's Golara. "If we have a mix of some companies handling tariffs well, we won't see broad-based inflation rise to a painful level. We might see pocketed effects in different and specific products and sectors," he said. Other experts agree the pause is good news for companies and consumers. "The tariffs were so punishing that it was creating this incentive not to import anything from China," Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University told CBS MoneyWatch. "The announcement is also good news because it means supply is not going to be as restrained as it was." It doesn't mean the U.S. it completely out of the woods, though. "It's still a significant increase in taxes for American consumers. We are still in a worse position than we were," de Rugy said. How are companies reacting? Businesses are still grappling with significant economic uncertainty, making it hard to plan for the future. "If you're a small business and don't know what your inputs will cost next week or in 90 days, it's going to be extremely difficult to do business in this uncertain environment," Jacquez said. Kim Vaccarella, founder and CEO of Bogg, a U.S-based beach bag and accessories company that makes its products in China, has been scrambling to shift at least some of its manufacturing to Vietnam and Sri Lanka because of the Trump administration's stepped-up tariffs. "We were looking at alternatives and set up viable sources in both countries, and we were working toward manufacturing there," she told CBS MoneyWatch. Then came The White House's announcement on Monday. With the U.S. earlier this year having raised its country-based tariffs on Vietnam and Sri Lanka to o46% and 44%, respectively, China may again be Vaccarella's best option. "Now we are back to square one, because at 30% it's less expensive to manufacture in China," she said. "If tariffs stay at 30% or go lower, it just looks like we spent a lot of money quickly trying to ramp up production somewhere else, because that would have been more acceptable under this current nightmare." Vaccarella had warned customers that the price of Bogg bags could jump as early as July. "But 30% we can work with," she said. "There might have to be a small increase, but it won't be what it would have been at 145%."
CNBC
08-05-2025
- Business
- CNBC
AI hunger games, China's social experiment and ANT's return: Louis-Vincent Gave unpacks global order
Gavekal's Louis-Vincent Gave discusses issues ranging from China's stimulus push, U.S.-China policy divergence, the de-dollarization shift, and why China's AI race could crush margins — plus, why he believes Washington needs a deal more than Beijing.
The Hindu
06-05-2025
- Business
- The Hindu
'Asian crisis in reverse' as currencies soar on the dollar
Ripples from Friday and Monday's record rally in the Taiwan dollar are now spreading outward, driving surges for currencies in Singapore, South Korea, Malaysia , China and Hong Kong. The moves sound a warning for the dollar because they suggest money is moving in to Asia at scale and that a key pillar of dollar support is wobbling. While Tuesday brought a measure of stability, following a stunning 10% two-day leap for Taiwan's currency, Hong Kong's dollar was testing the strong end of its peg and the Singapore dollar has soared close to its highest in more than a decade. "To me, it has a very sort of Asian-crisis-in-reverse feel to it," said Louis-Vincent Gave, founding partner of Gavekal Research, in a podcast, due to the speed of the currency moves. In 1997 and 1998, capital flight sank currencies from Thailand to Indonesia and South Korea and left the region determined to accumulate dollars in the aftermath. "Since the Asian crisis, Asian savings have not only been massive, but they've had this tendency to be redeployed into U.S. Treasuries. And now, all of a sudden, that trade no longer looks like the one-way slam dunk that it had been for so long," said Gavekal's Gave. Traders in Taiwan had reported difficulty executing trades, such was the one-sided wave of dollar selling, and speculated it had been at least tacitly endorsed by the central bank. Dealers said volumes were heavy in other Asian markets. At its heart, the break has been triggered by U.S. President Donald Trump's aggressive tariffs, analysts said, rattling investors' confidence in the dollar and upending the flow of trade dollars into U.S. assets in two places. First, exporters especially in China can expect fewer receipts as tariffs cut access to U.S. customers. Second, fear of a U.S. downturn casts a shadow over U.S. asset returns. "Trump's policies have weakened the market's confidence in the performance of U.S. dollar assets," said Gary Ng, senior economist at Natixis. Some are speculating on what markets have termed a "Mar-a-Lago agreement," he said, or a deal - named after Trump's gilded Florida resort - to weaken the dollar. Taiwan's Office of Trade Negotiations denied tariff talks in Washington last week had involved the topic of foreign exchange. Talk becomes reality Asia's biggest piles of dollars sit in China, Taiwan, South Korea and Singapore, which combined number in the trillions. In China alone, foreign currency deposits at banks - mostly dollars and largely held by exporters - were $959.8 billion at the end March, the highest in nearly three years. On top of that are layered investments funded in these currencies, which have low borrowing costs by global standards and investments in U.S. stocks and bonds by pension and insurance funds, which have tended to keep foreign exchange hedges small due to the costs involved. There are signs the dollar view is shifting from all corners. Goldman Sachs said in a note on Tuesday that investor clients had recently flipped from short yuan positions, to long positions, or in other words, they are shorting the U.S. dollar expecting further weakness. Robin Xing, Morgan Stanley's chief China economist, said Trump's April 2 "Liberation Day" tariff announcement was the wake-up call that forced investors to at least hedge, if they weren't selling, U.S. assets. "Over the mid- and long-term, I think people start thinking: how to diversify assets in the future, rather than be stuck in the outdated mentality of dollar supremacy." A popular trade that involved buying cheap U.S. dollars in the Hong Kong dollar forwards market, known in markets as the gift that never stopped giving, also went into reverse since it rested on the Hong Kong dollar staying still. "Macro funds and leveraged players have hundreds of billions of dollars in the HKD forwards free-money trade, and now they are unwinding," said Mukesh Dave, chief investment officer at Aravali Asset Management, a global arbitrage fund based in Singapore. Hong Kong's de-facto central bank said on Monday it has been reducing duration in its U.S. Treasury holdings and diversifying currency exposure into non-U.S. assets. Rallies in Asia's bond markets suggests exporters' and long-only money may be coming home, too. "Repatriation talk is becoming reality," said Parisha Saimbi, Asia-Pacific rates and FX strategist at BNP Paribas in Singapore, as investors and exporters are either unwinding or rushing to hedge. "Whichever format it comes in, it suggests that the support for the dollar is shifting and it's turning lower ... I think it speaks to this idea that there is a de-dollarization in action." UBS estimates that if Taiwan's insurance companies increased hedging ratios to their 2017-2021 averages, it could be worth some $70 billion in U.S. dollar selling. To be sure, Taiwan's central bank has vowed to stabilise the local currency and even the island's president took the unusual step of recording a video message to insist the exchange rate was not part of U.S. trade talks. Still, the market seems to be voting with its wallet. "USD/TWD is a canary in the coal mine," said Brent Donnelly, veteran trader and president at analytics firm Spectra Markets. "Asian demand for U.S. dollars and Asian central bank desire to support the U.S. dollar is waning."
Zawya
06-05-2025
- Business
- Zawya
'Asian crisis in reverse' as currencies soar on the dollar
A wave of dollar selling in Asia is an ominous sign for the greenback as the world's export powerhouse starts to question a decades-long trend of investing its big trade surpluses in U.S. assets. Ripples from Friday and Monday's record rally in the Taiwan dollar are now spreading outward, driving surges for currencies in Singapore, South Korea, Malaysia , China and Hong Kong. The moves sound a warning for the dollar because they suggest money is moving in to Asia at scale and that a key pillar of dollar support is wobbling. While Tuesday brought a measure of stability, following a stunning 10% two-day leap for Taiwan's currency, Hong Kong's dollar was testing the strong end of its peg and the Singapore dollar has soared close to its highest in more than a decade. "To me, it has a very sort of Asian-crisis-in-reverse feel to it," said Louis-Vincent Gave, founding partner of Gavekal Research, in a podcast, due to the speed of the currency moves. In 1997 and 1998, capital flight sank currencies from Thailand to Indonesia and South Korea and left the region determined to accumulate dollars in the aftermath. "Since the Asian crisis, Asian savings have not only been massive, but they've had this tendency to be redeployed into U.S. Treasuries. And now, all of a sudden, that trade no longer looks like the one-way slam dunk that it had been for so long," said Gavekal's Gave. Traders in Taiwan had reported difficulty executing trades, such was the one-sided wave of dollar selling, and speculated it had been at least tacitly endorsed by the central bank. Dealers said volumes were heavy in other Asian markets. At its heart, the break has been triggered by U.S. President Donald Trump's aggressive tariffs, analysts said, rattling investors' confidence in the dollar and upending the flow of trade dollars into U.S. assets in two places. First, exporters especially in China can expect fewer receipts as tariffs cut access to U.S. customers. Second, fear of a U.S. downturn casts a shadow over U.S. asset returns. "Trump's policies have weakened the market's confidence in the performance of U.S. dollar assets," said Gary Ng, senior economist at Natixis. Some are speculating on what markets have termed a "Mar-a-Lago agreement," he said, or a deal - named after Trump's gilded Florida resort - to weaken the dollar. Taiwan's Office of Trade Negotiations denied tariff talks in Washington last week had involved the topic of foreign exchange. TALK BECOMES REALITY Asia's biggest piles of dollars sit in China, Taiwan, South Korea and Singapore, which combined number in the trillions. In China alone, foreign currency deposits at banks - mostly dollars and largely held by exporters - were $959.8 billion at the end March, the highest in nearly three years. On top of that are layered investments funded in these currencies, which have low borrowing costs by global standards and investments in U.S. stocks and bonds by pension and insurance funds, which have tended to keep foreign exchange hedges small due to the costs involved. There are signs the dollar view is shifting from all corners. Goldman Sachs said in a note on Tuesday that investor clients had recently flipped from short yuan positions, to long positions, or in other words, they are shorting the U.S. dollar expecting further weakness. Robin Xing, Morgan Stanley's chief China economist, said Trump's April 2 "Liberation Day" tariff announcement was the wake-up call that forced investors to at least hedge, if they weren't selling, U.S. assets. "Over the mid- and long-term, I think people start thinking: how to diversify assets in the future, rather than be stuck in the outdated mentality of dollar supremacy." A popular trade that involved buying cheap U.S. dollars in the Hong Kong dollar forwards market, known in markets as the gift that never stopped giving, also went into reverse since it rested on the Hong Kong dollar staying still. "Macro funds and leveraged players have hundreds of billions of dollars in the HKD forwards free-money trade, and now they are unwinding," said Mukesh Dave, chief investment officer at Aravali Asset Management, a global arbitrage fund based in Singapore. Hong Kong's de-facto central bank said on Monday it has been reducing duration in its U.S. Treasury holdings and diversifying currency exposure into non-U.S. assets. Rallies in Asia's bond markets suggests exporters' and long-only money may be coming home, too. "Repatriation talk is becoming reality," said Parisha Saimbi, Asia-Pacific rates and FX strategist at BNP Paribas in Singapore, as investors and exporters are either unwinding or rushing to hedge. "Whichever format it comes in, it suggests that the support for the dollar is shifting and it's turning lower ... I think it speaks to this idea that there is a de-dollarization in action." UBS estimates that if Taiwan's insurance companies increased hedging ratios to their 2017-2021 averages, it could be worth some $70 billion in U.S. dollar selling. To be sure, Taiwan's central bank has vowed to stabilise the local currency and even the island's president took the unusual step of recording a video message to insist the exchange rate was not part of U.S. trade talks. Still, the market seems to be voting with its wallet. "USD/TWD is a canary in the coal mine," said Brent Donnelly, veteran trader and president at analytics firm Spectra Markets. "Asian demand for U.S. dollars and Asian central bank desire to support the U.S. dollar is waning." (Reporting by Tom Westbrook, Vidya Ranganathan, Ankur Banerjee and Rae Wee in Singapore, Jiaxing Li in Hong Kong and Winni Zhou and Samuel Shen in Shanghai; Writing by Tom Westbrook; Editing by Kim Coghill and Joe Bavier)
