China: No one wins in a trade war – Nomura

Analysts at Nomura expect US tariffs on steel and aluminium imports to have little impact on China’s exports, but the risks are rising that President Trump may impose broader tariffs on Chinese imports.

Key Quotes

“In an all-out trade war, no one wins easily. That said, we still believe the likelihood of a trade war is limited.”

“Does this change our economic views? No. We maintain our call for China’s real GDP growth to slow to 6.5% in 2018 from 6.9% in 2017.”

“Strategy implications? Although not our base case, if trade tensions escalate to the point that growth slows significantly it would be positive for high-grade bonds like CGBs, while spreads could widen. However, as we expect tensions to be contained and unlikely to significantly undermine growth, we expect China rates to be more driven by liquidity conditions and financial deleverage efforts.”