It is now our baseline scenario that a 10% tariff will be levied on the remaining USD 300bn of Chinese exports to the US on 1 September. This move may be followed by a moderate escalation in US-China tensions. We put the chances of extreme escalation that threatens global economic expansion at 30%. De-escalation represents an upside scenario.
Key milestones for investors to watch are whether the 10% tariff takes effect on 1 September, the retaliatory response China chooses, and whether the Fed rate decision meets market expectations on 18–19 September.
We believe the current environment is manageable but challenging for risk assets. We maintain a tactical preference for carry trades that can help enhance portfolio income.
Read more in the full report .
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Appendix
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