JPMorgan sees all-out US-China tariffs, lowers yuan call

(Oct 1): With little prospect of a restart for US-China trade talks, JPMorgan Chase & Co. now expects an escalation in tensions that will see higher American tariffs on all Chinese imports, sending the yuan sliding to its weakest against the dollar in more than a decade.

“JPMorgan has adopted a new baseline that assumes a US-China endgame involving 25% US tariffs on all Chinese goods in 2019,” JPMorgan strategists including John Normand wrote in a note Friday. While growth forecasts for both the US and China aren’t much affected, thanks in part to Chinese stimulus measures, “a weaker yuan becomes part of the new equilibrium,” they wrote.

The People’s Bank of China will probably pursue a looser monetary policy to shore up growth in face of the threats to trade, and likely won’t intervene much to counter resultant downward pressure on the yuan, according to the JPMorgan analysis.

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