Stocks ended Wednesday on a high note, but the gains were capped thanks to a key part of the U.S. yield curve inverting and adding to fears of a recession.
Traders have also been closely watching (and reacting to) trade war developments between the world’s two largest economies. But if Deutsche Bank has it right, those on Wall Street might not want to hold their breath for a solution.
China is gearing up for a battle that could last as long as the U.S.-Japan trade war in the 1980s, which spanned more than a decade, according to Yi Xiong, China economist at Deutsche Bank. In a note to clients Wednesday, Xiong said the time horizon China is getting ready for may go well beyond the lifecycle of the current U.S. administration.
President Donald Trump shocked markets by abruptly ending a trade truce earlier this month and announcing a 10% tariff on $300 billion of Chinese goods. China retaliated with smaller tariffs ranging from 5% to 10% on $75 billion in U.S. goods. That move by China was not to maximize damage, but to “disincentive further U.S. tariffs,” Xiong said.
