UBS(US:UBS)2025-04-17 03:21Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - The US has raised "reciprocal tariffs" on China to 125%, with China retaliating with similar tariff hikes, leading to significant trade tensions [2][3] - Approximately 60% of US imports from China are now subject to tariff hikes of 145%, which includes both the new reciprocal tariffs and previously implemented fentanyl tariffs [3][4] - The report anticipates a substantial decline in China's exports to the US, projecting a decrease of two-thirds in the coming quarters and an overall export decline of 10% in USD terms for 2025 [8][11] - A broad fiscal expansion of 1.5-2 percentage points of GDP is expected from China to support the economy amid these challenges [9][13] - The GDP growth forecast for China has been downgraded to 3.4% for 2025 and 3% for 2026, reflecting the adverse effects of tariff shocks [11][17] Summary by Sections Tariff Impact - The US has implemented significant tariff hikes on various goods, with the latest exemptions for electronics adding an estimated $64 billion of US imports from China to the exempted list [3][4] - The report suggests that ongoing tariff negotiations may not lead to immediate reductions in the current tariff levels [7] Economic Forecast - The report estimates that the tariff hikes will drag down China's GDP growth by more than 2 percentage points, with a notable impact on domestic investment and consumption [8][11] - The expected inflation in China is projected to be negative in both 2025 and 2026 due to reduced external demand and domestic price pressures [11] Currency Outlook - The report does not foresee significant movements in the USDCNY exchange rate, predicting it to trade around 7.5 by the end of 2025 [12][17]