US-China trade tension: is it a concern for Asian equity market?

We expect the increasing uncertainty over trade policies will lead to negative sentiment and resulting volatility of equity markets in the short term

Mar 26, 2018 | Invesco Asian Investment Team

On March 22nd, US President Donald Trump signed a memorandum that would impose 25% tariffs on up to US$60bn in annual imports from China, relating to intellectual property practices under section 301 of the 1974 Trade Act. Earlier this year, the US has announced imports tariffs on steel and aluminium on the ground of national security under section 232 and those on washing machines and solar panels too.

In reaction to the newly proposed tariffs, the Ministry of Commerce in China responded by announcing similar tariffs on around US$3bn US imports ranging from fresh fruits to steel pipes.

We believe the current trade issue between China and the US will continue to weigh on investor sentiment and the overhang of escalation in trade tension will keep the market nervous and raise near-term volatility. However our base case assumes that China and the US will resolve the dispute through ongoing negotiations rather than move towards a full-fledged war.

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