Ahead Today
G3: Germany IFO, US Durable Goods
Asia: China industrial profits, Thailand exports and trade
Market Highlights
Some positive signals emerged out of trade talks between the US and Chinese trade negotiation teams in Malaysia, and ahead of an anticipated meeting between President Trump and President Xi in South Korea later this week. Both sides characterised the meeting in reasonably constructive terms, with the US side saying it was “constructive, far-reaching, and substantive”, while China said it was “candid, in-depth and constructive”, with the US taking a firm stance while China being resolute in safeguarding its interests. The next step is to bring the proposals back for respective internal approvals on both sides, presumably for both Trump and Xi to decide on.
While full details are not yet out, the comments and readouts over the weekend suggest among other things, the Section 301 shipbuilding and port fees, extending the reciprocal tariff suspension, fentanyl-related tariffs, soybean and agricultural purchases, coupled with export controls were discussed. Meanwhile the US side was somewhat more explicit, saying that we could see a one-year delay in implementation of China’s rare earth export controls, significant purchases in soybeans, with no changes in US’ export controls expected according to the US Treasury Secretary.
To our minds, for China to actually agree to a one-year delay in implementation of China’s rare-earth export controls would probably require some additional meaningful concession from the US side (see Asia FX Talk – China significantly expands export controls on critical minerals). In a best case scenario based on what we know was discussed, we could see some reduction in the fentanyl related tariffs for China (currently at 20%) and/or changes in shipbuilding and port fees, which if true and depending on the finer details could be supportive of Chinese risk assets and CNY.
Meanwhile, during the ASEAN Summit meetings over the weekend, the US signed official trade agreements with Malaysia and Cambodia, together with framework agreements with Thailand and Vietnam with an expectation for a full trade agreement to be agreed and signed in subsequent weeks. The headline reciprocal tariff rates were unchanged – 19% for Malaysia and Thailand and 20% for Vietnam. Nonetheless, there were other additional details of note. For one, the agreements left open the possibility of some additional exemptions on products to be decided at a later date beyond the reciprocal tariffs. Second, Malaysia’s trade deal does not include any agreement on semiconductor and electronics tariffs. Third, Vietnam is expected to grant preferential market access for substantially all US industrial and agriculture exports, with also some acceptance of US auto, medical device and pharma standards. Overall, we see these trade developments and agreements as a positive for at least some policy certainty moving forward, although of course moving forward key questions around sectoral tariffs including on pharma and electronics, and also the legality of Trump’s usage of IEEPA will continue to cloud the picture for Asia’s exports through 1H2026.