Trouble ahead? Tensions rise in US/China trade dispute

This month saw the imposition of 25% US tariffs on $34bn of imports from China, with US duties on another $16bn of Chinese goods to be added following a consultation period. As yet, initial direct economic impact from these tariffs appears minimal. Metal exports to the US are less than 3% of total exports even for Canada and Mexico, while for China, the latest levies are expected to knock only c.0.1-0.2% off GDP growth. However, Trump’s threat of tariffs on an additional $200bn of Chinese imports could have more material consequences for growth and ‘risk’ appetite.

The US and China are predominantly domestically driven economies (exports are only 10% of GDP in the US and 20% of GDP in China), but for China, this exogenous headwind compounds the policy induced economic slowdown attributable to Beijing’s deleveraging focus. Moreover, while China’s manufacturing PMIs continue to reflect growth, new export PMIs pointed to weaker trade momentum even before the latest round of tariffs. Beijing’s policymakers have begun to respond, with the People’s Bank of China (PBoC) offering rhetorical support to the renminbi, and recent targeted reserve requirement ratio cuts for major banks indicating a more nuanced approach to deleveraging.

US-China tensions (both economic and geopolitical) are likely to become a more permanent feature of the investment backdrop, as the market is now beginning to price. Despite last month reducing its sectoral “negative list”, China remains particularly restrictive and selective when it comes to foreign direct investment and President Xi’s flagship “Made in China 2025” policy appears to have piqued both sides of the US political establishment to the limitations of “constructive engagement” and the challenge China poses.

Trevor Holder – portfolio manager. Newton, a BNY Mellon company

This month saw the imposition of 25% US tariffs on $34bn of imports from China, with US duties on another $16bn of Chinese goods to be added following a consultation period. As yet, initial direct economic impact from these tariffs appears minimal. Metal exports to the US are less than 3% of total exports even for Canada and Mexico, while … read more

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Could a ridesharing revolution boost investment prospects?

While the comprehensive introduction of rideshare systems could take years to develop, we anticipate significant progress will be made by 2020 to 2021, at which stage we believe people will be far more aware of the importance of this sector. Looking ahead, people in cities are less likely to buy a car if there is a good transport service, and we are not alone in believing the world is moving toward the wider use of robo-taxis and automated vehicles.

Cities with poor public transportation might see ridesharing as a great supplement to public transport. Ridesharing makes a lot sense in cities with poor public transport, and shared mobility also holds broad appeal in global markets such as China. Many people living in cities are also realising that owning a car is a wasted resource, as it spends most of its time parked and the rest of its time contributing to traffic congestion.

In many ways ridesharing is little different to sitting next to strangers on a subway train or bus and in-car security cameras could bring an added level of reassurance to passengers. Younger generations are already embracing the ridesharing trend and, over time, I expect many more people will become comfortable with it as well.

Barry Mills – senior research analyst. The Boston Company, part of BNY Mellon Asset Management North America.

While the comprehensive introduction of rideshare systems could take years to develop, we anticipate significant progress will be made by 2020 to 2021, at which stage we believe people will be far more aware of the importance of this sector. Looking ahead, people in cities are less likely to buy a car if there is a good transport service, and … read more

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A healthier future? How current spending patterns could point the way

Are we headed for a more health conscious future? Current spending patterns – and especially those of ‘generation Z’ consumers – appear to suggest so.

According to Morgan Stanley, spending on sports apparel rose from US$199.1m in 2009 to US$314.1m in 2017 and is projected to reach US$365.2m by 2020. However, this is just a small segment of the wellness and fitness industry, which in the UK alone is estimated to reach a value of £22.8bn by 2020, according to Statisa. Gym membership is also on the rise. Figures from The Leisure Database Company suggest one in seven of people in the UK now regularly work out.

We believe food consumption habits are another leading indicator for future health spend. Fresh foods such as salads and juices are taking the place of canned and refrigerated goods in the shopping baskets of young consumers. Data from Barclay’s suggests Generation Z consumers are buying 57% more tofu and 550% more dairy-free milk than older cohorts.

Meanwhile, pharmaceutical companies are also beginning to get in on the game: over-the-counter medication and health supplements continue to gain traction as consumers demonstrate a preference for preventative healthcare over traditional prescriptions.

Amy Chamberlain and Stephen Rowntree – global analysts. Newton, a BNY Mellon company

Are we headed for a more health conscious future? Current spending patterns – and especially those of ‘generation Z’ consumers – appear to suggest so. According to Morgan Stanley, spending on sports apparel rose from US$199.1m in 2009 to US$314.1m in 2017 and is projected to reach US$365.2m by 2020. However, this is just a small segment of the wellness … read more

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All hail our algorithmic overlords?

Artificial intelligence (AI) is frequently touted as having the potential to revolutionise every aspect of our daily lives from work to leisure time; commuting to healthcare. Less optimistically, though, luminaries such as Elon Musk among many others have drawn attention to the possible dangers of AI: that by creating the singularity we risk ‘summoning a demon’ that ultimately consigns humanity to oblivion.

We take a more optimistic view, noting that while emerging technologies have often given rise to scare stories about their impact on people’s health and behaviour their benefits have usually outweighed the drawbacks.

For now – and even though it’s still in its infancy – we can highlight how effective AI has been in the fields of healthcare diagnostics, medicine prescriptions, and air travel. For the future, we believe AI is likely to give companies a second wind when it comes to productivity, allowing them to be more efficient, better, faster and actually quite creative in how they transform their offerings.

This in turn should improve growth and therefore, hopefully, generate new kinds of jobs. Far from creating a techno-apocalypse I think AI has the power to transform the world for the better and not for the worse.

April LaRusse – Fixed Income product specialist. Insight Investment, a BNY Mellon company

Artificial intelligence (AI) is frequently touted as having the potential to revolutionise every aspect of our daily lives from work to leisure time; commuting to healthcare. Less optimistically, though, luminaries such as Elon Musk among many others have drawn attention to the possible dangers of AI: that by creating the singularity we risk ‘summoning a demon’ that ultimately consigns humanity … read more

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