Asian stock markets are celebrating the latest headlines that the first phase of a potential trade deal agreement is planned to be
signed by mid-November 2019. Yet the trend does not support EU equities as the US is expected to announce tariffs of $7.5 billion on EU goods by
mid-October following WTO ruling on Airbus subsidies while rumors of potential tariffs on Swiss pharma are emerging.
Asian investors have turned to US-China trade negotiations that would force China to purchase up to $40 - $50 billion of US agricultural
products per year, in exchange for a deferral of US tariffs on $250 billion of Chinese goods. Yet trade progresses remain limited since the
coming phases focusing on structural issues such as forced technology transfer, intellectual property protection and government
subsidies are likely to mute current optimistic views as December tariffs on $156 billion of Chinese goods are still on the pipeline.
Despite short-sight optimism, the release of September exports and imports at -3.20% (prior: -1%) and -8.50% (prior: -5.60%), drops to
respectively 7-month and 4-month low amid sluggish domestic demand should force Chinese authorities to strengthen monetary policy
easing measures in order to maintain current growth target within the lower end of current 6% - 6.50% target band. On the same line, EU
lawmakers are willing to take countermeasures against US duties on aerospace, whiskey and cheese due in the coming days as further tariffs
on EU cars could well come into force in November, paving the way towards escalating trade tensions. In addition, the Swiss pharmaceutical
industry could face similar sanctions with an introduction of tariffs on Swiss drugs exports in the US, the second largest market after the
EU. The latter would not only harm the competitiveness and margins of the Swiss pharmaceutical industry (e.g. generics and biosimilars),
but would also have a considerable impact on the country, as the industry represents about one-fifth of GDP contribution.
USD/CNY is currently trading at 7.0743, slightly above current fixing at 7.0725
By Vincent Mivelaz
