Trade tensions, soft earnings cloud China’s outlook: BofA
Investing.com -- China is bracing for higher U.S. tariffs despite ongoing trade negotiations, with experts expecting a bumpy road ahead for bilateral relations at a time when weak corporate earnings and household income remain a concern, according to a recent Bank of America report summarizing takeaways from their China macro tour.
"Both Chinese and US experts largely agreed that additional US tariff hikes on Chinese products are likely and that China stands ready to react with counter measures, despite higher tariff threats ahead," BofA analysts said in a note Thursday.
The report, based on meetings with academics, policy advisors and industry experts in Beijing, suggests China remains open to dialogue but is preparing for potential escalation.
Under a positive scenario, however, China could offer more open market access to American firms, higher investments in the U.S., and increased purchases of U.S. goods.
The uncertain U.S.-China trade outlook comes as concerns about soft corporate earnings and household income persist despite the expansion in budget deficit and larger fiscal package for 2025.
Consumption has stabilized but still faces headwinds from the property market and income expectations. Experts noted fading effectiveness of previously announced consumer goods trade-in policies and expect further fiscal support if retail sales growth continues to ease.
The property market, which has been a major drag on the economy, remains on uncertain ground, with many cautioning against reading too much into the recent flickers of recovery as a rebound. Price declines have narrowed marginally nationwide, though stabilization remains elusive, with tier-2 and tier-3 markets still facing challenges.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.
Further fiscal policy measures would need to be implemented if external conditions deteriorate, the analysts said.
On the monetary policy front, meanwhile, further easing faces challenges, the analysts added, as People’s Bank of China prioritizes exchange rate stability and banks’ net interest margins. While further cuts to the reserve requirement ratio are anticipated in Q2 2025, their effectiveness is questioned due to weak business confidence.
Which stock should you buy in your very next trade?
With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities.
In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record.
With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.
