Greg Gibbs, analyst at Amplifying Global FX Capital, suggests that the market should be bracing for retaliatory action by the Chinese government against US companies selling products and services in China.
“A number of major US companies such as Apple and Caterpillar are experiencing weaker share prices on fears that China will use its persuasion or direct regulatory power to damage sales by these companies in China (and elsewhere).”
“The Huawei action suggests that it will be harder for the US and China to resume constructive talks on a trade deal. This suggests that punitive tariffs will remain in place, and indeed may be increased further; the US administration has said it plans to extend 25% tariffs from 200bn of Chinese goods to all Chinese imports of around $500bn per year.”
“There are currently no plans to continue the trade negotiations. The delay in setting a timetable suggests there is a stalemate.”
“The US administration appears to be digging in on its battle with China and may be looking for support from its allies, or at least wary of alienating them further at this time.”
“There is a long and wide tail risk associated with the Huawei ban, and we need to be wary of a significant fallout to global risk assets.”