The US-China trade war may undermine overseas demand for Chinese goods and dent a recovery in corporate earnings as they turn to reluctant domestic buyers to open their purse strings, according to Morgan Stanley.
The impact on corporate earnings would probably be more visible from the second quarter, assuming there was no further escalation in trade tensions or a bigger fiscal support from Beijing, analysts Laura Wang and Chloe Liu said in a report on Thursday.
Earnings from members of the MSCI China Index came in within market expectations in the fourth quarter, according to the US investment bank, after missing targets in the preceding three and half years.
“The tariff tensions will cast further uncertainty on the earnings outlook,” the analysts said. “We see downward risk to our base case earnings growth outlook for 2025, despite the latest improved quarterly results from the fourth quarter.”
Stocks on the mainland and Hong Kong suffered this week after the US imposed so-called reciprocal tariffs on imports from China and other trading partners. China retaliated with a matching 34 per cent levy last Friday, prompting the Trump administration to raise the tariffs to 145 per cent.
