There’s a 60% chance that US President Donald Trump will forgo tariffs, according to Nathan Sheets, chief economist and global head of macro research, PGIM Fixed Income.
”We have relatively cautious expectations for this week’s US-China trade negotiations. A potential truce or de-escalation in the trade war is a ‘good news’ card for President Trump, and he could wait for additional political developments over the next six weeks before playing any ‘good news’ card.
“Trump will be in a better place electorally if there are fewer tariffs in place, not more. Thus, we see a probability of about 60% that Trump forgoes another increase in tariffs next week. Even if some tariffs are eventually rolled back, this ‘good news’ scenario is not nearly as good as the one that existed last spring.
“As an example of how this may affect our exposure in corporate bonds, we have become more defensive regarding China and intend on limiting exposure in the short to medium term. We are limiting our exposure to industries that rely on China in some capacity, such as capital goods and technology, while favouring sectors with minimal exposure to China.”