Trade and forecast update: tensions remain elevated - Nomura

Analysts at Nomura explained that US-China trade tensions remain elevated as the next round of China tariffs, 25% on another $200bn, is under review.

Key Quotes:

A new round of USChina midlevel talks scheduled for this week may reflect a renewed effort to find common ground. Despite the increased effort, we believe it is more likely than not that additional protectionist measures will go into effect. President Trump appears increasingly intent on challenging China’s trade and industrial policies and we do not see any meaningful change in China’s priorities. 

In this context it seems unlikely that negotiations will resolve the dispute within the next few weeks. 

While we expect fiscal stimulus to support above-potential growth from the US economy over H2 2018 and H1 2019, we are probably experiencing the strongest effects right now. Growth should moderate gradually from here, moving towards potential in H2 2019 and 2020. We anticipate additional protectionist measures from the Trump administration will be a modest drag on growth in coming quarters.