UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio '“Substantial progress”'
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May 12, 2025 Trade discussions between the US and China are heating up, with hints of progress on tariffs. Investors are analyzing how far the US might retreat on trade taxes, as current tariffs severely impact bilateral trade. An 80% tariff could bring trade to a standstill, while a 20% rate might hurt the US economy but permit some trade to continue. Additionally, the podcast explores market trends and current economic insights that influence investment strategies and shape future economic growth.
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Progress in US-China Trade Talks
- US Treasury Secretary described Sino-US talks as making substantial progress on trade over the weekend.
- Investors primarily want to know how far and fast the US will reduce trade taxes to resume trade.
Impact of Tariff Rates on Trade
- Current tariffs effectively stop bilateral trade between the US and China.
- An 80% tariff also halts trade; a 20% tariff allows trade but damages the US economy.
China Reroutes Exports to Bypass Tariffs
- China's April export strength is due partly to rerouting goods through third countries to bypass US tariffs.
- After 2018, about a third of exports to the US used rerouting to blunt trade tax effects.