Deutsche Bank on what the tariffs mean in the FX market and their focus on China
Deutsche Bank is out wit ha quick note on the tariffs:
Quick summary of President Trump’s announcements: tariffs on the American continent are lower than expected, European tariffs are as expected, tariffs on Asia significantly higher than expected. There should be a straightforward FX re-adjustment between Asia FX (weak) and Latam FX + CAD (strong) in coming days.
Going forward, they are watching for whether China will allow yuan devaluation or will try to negotiate away the 20% fentanyl portion of the tariffs.
The negative global spillover to the rest of the world in coming days will largely be determined by the extent to which China allows the policy-determined USD/CNY to move materially above 7.20 or decides to do more fiscal stimulus instead.
That’s some straight-forward analysis.
My guess is that China lets it play out for awhile and lets the US alienate its allies, while stepping into the void.
