BlackRock Predicts Temporary Halt In US-China Trade War By Yearend

U.S. President Donald Trump and French President Emmanuel Macron meet
President Donald Trump gestures during a meeting with French president Emmanuel Macron at the Prefecture of Caen, Normandy, in France. (Photo: Ludovic Marin/Pool via REUTERS)

Yes, there's still a chance China and the United States will reach a deal to mitigate Trump's trade war -- but this will likely take place by the end of the year. Then, there's Trump's new trade war with Mexico to contend with.

American global investment management corporation BlackRock, Inc., however, said this trade deal won't resolve all the tensions between both feuding countries.

"We do think a trade deal will happen, but let's be very clear: Will it solve all the underlying tensions between the U.S. and China, in particular, the more strategic issues present in the tech sector? We don't think so," said Isabelle Mateos y Lago, deputy head of BlackRock's Official Institutions Group.

In this sense, any trade deal between Washington and Beijing will likely be "narrow" while investor sentiment will remain fragile.

She said investors remain worried about Trump's recent threats to impose new and accelerating tariffs on Mexico to compel Mexico to deal with America's immigration concerns.

"There are a number of worries at the same time right now," said Mateos y Lago.

"There are the U.S.-China tensions, there are the new tariff threats against Mexico which has roiled markets and sentiment because they seem to signal a new use of tariffs for non-trade related issues."

Mateos y Lago also believes that "if we get resolution on the China front, that's good. But we'll need resolution on the Mexico front as well."

The new 5 percent tariffs Trump will impose on Mexico -- probably in July -- will initially lead to the loss of 400,000 jobs throughout the U.S. Mexico is now the U.S.' largest trading partner due to Trump's trade war on China.

This number will jump significantly when Mexico implements its own counter-tariffs targeted at states that voted for Trump in the 2016 presidential election. These pro-Trump states include Texas, which is Mexico's largest export market. The tariffs will initially cost Texas more than 117,000 jobs.

"To impose tariffs on all goods from our largest trading partner will cause significant cost increases and other harms to the economy," said an analysis by The Perryman Group, an economic consulting firm.

The Perryman Group report said much of the job losses will occur in the retail trade sector, which includes clothing, furniture stores, restaurants, and auto parts dealers. This sector stands to lose 136,516 jobs in total, said, Perryman. In addition, more than 50,000 jobs might from the manufacturing industry stand to evaporate.

"Free trade is clearly beneficial," said Perryman. "Basic economic theory and centuries of evidence support this fact."

Mateos y Lago's Official Institutions Group manages $411 billion of assets for entities, including central banks and sovereign wealth funds. On the other hand, BlackRock has been called the world's largest shadow bank on account of its power and the sheer size and scope of its financial assets and activities.

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