“If you see ten troubles coming down the road, you can be sure that nine will run into the ditch before
they reach you.” ‐ Calvin Coolidge
The administration’s skepticism on existing trade deals bore teeth in the first quarter,
sparking volatility as investors seek to balance the back‐and‐forth headlines with a steady
flow of positive economic data. Most analysts expect a negotiated peace, but the
president’ sizable authority on trade compels us to consider the implications a trade war.
China’ size obscures the fact that it remains a poor country heavily reliant on U.S.
demand to support its investment‐led growth model. If politics rules out some form of
détente, the “in case of emergency, break glass” option to avoid a negative growth shock
would be currency devaluation. A significantly weaker yuan would have potentially large
repercussions, particularly for emerging market assets.
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