THE US and China have issued a joint statement on a 90-day pause on tariffs. Trade deals had historically taken time to iron out.
However, the fact that this is a joint statement, and a mechanism will be established to continue discussions about economic and trade relations, will allow markets to breathe a sigh of relief.
Clues indicating possibly better appetite for risker assets include the US treasury market seeing yields inching higher. The 115% tariff cut will take effect Wednesday, with both side at a 10% tariff.
The effective rate for China will be 30%, as 20% tariffs had been slapped on by US onto China before “liberation day”, earlier on account of a response to the fentanyl issue.
The US-United Kingdom (UK) deal reached last week provides a glimpse on the deal making.
Much lesser in magnitude in absolute trade value, the same 10% was evident, and still applied to most goods from the UK, including British cars, although some key exports such as steel and aluminium were left off the hook.
US president Trump has said that some other countries will have higher “baseline” (than 10%) as they have massive surplus.
The US has clarified that not all tariffs are carved out, citing for example measures as a response to combating fentanyl drug, tariffs imposed under other statute, and those applied from 2018 will continue.
“For the latter, we note that there have earlier been tariffs on the likes of gloves/solar panels/plastic products,” said Kenanga.
More broadly, regional markets have also mostly recovered to above “liberation day”. This is also true for the FBM KLCI which has eked out 1% growth, with some of the standout sectors including Telco, which is seen to be more defensive.
“This is less so for banks, which we foresee could benefit from increased appetite amid a move towards a more palatable tariff than initially feared,” said Kenanga. —May 13, 2025
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