The BlackRock Investment Institute, the think tank of one of the largest asset managers in the world, thinks China can weather tariffs on everything
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“We see limited direct economic impact of a ‘no deal’ scenario in the ongoing trade negotiations in which U.S. tariffs would be fully applied to all Chinese exports,” say BlackRock Investment Institute strategists led by Elga Bartsch, the Institute’s head of macro research. Bartsch and two other strategists said China “has the tools to cushion the impact.”On the same day, Nomura Securities strategists in Hong Kong forecast tariffs on all of China’s exports to the U.S.
“Applications for business investments in Thailand from Chinese companies is up three times from last year,” says Khun Chokedee, the deputy secretary general of the Thailand Board of Investment. Chokedee said the increase in actual, physical applications for a new business occurred over the first four months of the year versus the same period in 2018. “Part of those investment projects are the result of trade disputes,” he says.
Companies still like China, even with the tariffs. While U.S. companies may have to cut costs elsewhere or raise prices for consumers, China is dominant for a number of factors beyond simple economies of scale. China also has better logistics than most lower-cost producers in the neighborhood, and reliable, low-cost energy.
Huawei became No. 1 in less than ten years. Its new smartphone business is less than five years old and has replaced Apple in mainland China. Chinese policymakers are likely to continue to provide economic support across the board, particularly towards favored industries like tech. That gives BlackRock a reason to believe China can handle more tariffs.“Our research on the ground still pointed to confidence in the resilience of the Chinese economy, despite trade talks grinding to a halt,” writes Bartsch.
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