The trade truce struck by the United States and China in October eased business concerns that more damaging tariffs were on the way. But some companies may be too complacent.
One quarter of companies do not have any contingency plans to mitigate the risks posed by the trade war, according to a new survey from the global logistics company DHL.
The details: Nearly 50% of engineering and manufacturing companies who responded fell into this category, as did 40% of auto and transportation firms — even though both sectors have often been at the center of the action.
Two thirds of respondents said they had been impacted by the trade war, but roughly one third said they were adopting a wait-and-see approach over the next six months instead of taking immediate action.
Why it’s a concern: Axios reports that a promised “phase one” deal between the US and China is now “stalled because of Hong Kong legislation,” according to a source close to Trump’s negotiating team.
Beijing made clear Monday that it’s not happy that President Donald Trump, facing veto-proof majorities in Congress, signed legislation supporting Hong Kong’s pro-democracy protesters. Now the country is barring US military ships from docking in Hong Kong. China also announced sanctions on US NGOs based in Hong Kong that have been reporting on social unrest in the city.
Another issue: The removal of tariffs. “A deal looks no closer to being achieved and if reports over the weekend are to be believed — that China wants the full removal of existing tariffs — I don’t expect it to be wrapped up any time soon,” said Craig Erlam, senior market analyst at Oanda.
So why are markets pushing higher? The latest Caixin survey of China’s manufacturing industry looked surprisingly positive and indicated that the sector was growing once again.
But skepticism remains that China’s economy is really improving.
“We believe this is just a temporary bump, with pressure on the manufacturing sector likely to resume,” UBS strategists said, citing better market sentiment in November on trade deal hopes, and the fact that demand picked up heading into the holiday season.