US-China trade deal: uncertainties still persist ahead of ‘Phase 2’ – UOB

UOB Group’s Economist Ho Woei Chen and Senior FX Strategist Peter Chia reviewed the recent signing of the ‘Phase 1’ deal between the US and China.

Key Quotes

“The long-awaited US-China Phase One trade deal was finally signed on Wed (15Jan) by US President Trump and Chinese Vice Premier Liu He. The details of the trade deal are in line with the recent comments from US officials with regards to its scope and include more specifics on implementations and commitments by China.”

“Overall, the Phase One trade deal reduces the uncertainties for global trade but is unlikely to catalyze a strong rebound in growth, particularly for China, since the bulk of the US-China tariffs will remain in place.”

“Although US Vice-President Mike Pence said discussions have already begun for Phase Two agreement, President Trump had earlier indicated that it may not be concluded until after the US Presidential Election in Nov.”

“Despite renewed optimism in both trade relations and the Chinese economy, we are of the view that most of the positives are already in the price of the CNY. Nonetheless, if risk sentiment continues to stay strong and improve, it is likely our current end-year USD/CNY’s target of 7.20 is at risk of a downgrade.”