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J.P. Morgan Chase, an investment bank, published a report saying it believed that the possibility of a trade agreement between China and the United States was very high, and that the recent strong rebound in China's stock market was also driven by the cooling risk of trade war; but it believed that even if the two countries were expected to reach an agreement, they would not completely resolve their trade differences.
According to a report by Zhu Haibin, JPMorgan Chase's chief economist in China and head of China's equity strategy, constructive progress in the Sino-US trade negotiations may lead to a partial agreement between the two sides, while the risk of short-term tariff increases has been greatly reduced. However, uncertainties in the implementation phase of trade agreements are still high, and the threat to business confidence may persist.
The report anticipates that the next two rounds of high-level meetings between China and the United States will be able to resolve some of the remaining issues between the two sides, such as the executive powers attached to the conventional monitoring mechanism and the timetable for the gradual elimination of existing tariffs in the United States. The bank believes there is a high possibility of an agreement between China and the United States.
JPMorgan Chase said that the possible agreement between China and the United States is positive news for the global economy and financial markets. Previous analysis by the bank estimates that if the Sino-US trade war is fully launched, China's economic growth will be dragged down by about 1%, of which 0.3% is a direct impact on trade activities, and the remaining 0.7% is an indirect impact on investment, consumption and business climate.
However, with the risk of trade war cooling down, China's stock market has rebounded sharply recently, but the bank believes that the impact on macro-level is still limited. Firstly, China will increase imports from the United States substantially, which will offset the impact on net trade; secondly, because the expected currency will be part of the trade agreement, the report expects that the RMB will remain stable for the rest of the year (the bank has raised its forecast for the end of this year from 7.10 to 6.65), which will largely offset the tariff reduction warfare. The benefits of insurance; finally, the threat to business confidence may persist, as uncertainty remains high in the implementation phase of trade agreements.


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