Analysts at TD Securities note that the U.S. President Donald Trump has announced that the U.S. will impose 10% tariffs on the remaining $325bn of Chinese imports that are not yet subjected to tariffs.

• “Given that these imports are more consumer-oriented, we expect a larger impact on US growth and inflation, compared to previous tariff hikes.
• The rates market reacted sharply, pricing in 50bp of rate cuts in 2019 (up from 35bp yesterday). We think that the move is reasonable, especially with Powell referencing trade uncertainty as a key driver of rate cuts.
• We believe that China is likely to react, as in the two previous episodes of tariff imposition, adjusting the REER lower in order to offset the impact of tariffs. This will likely place upward pressure on USD/Asia as China-linked, trade-sensitive economies accommodate fundamental pressure on FX.”