Macro Focus – We have adjusted some growth forecasts

We have lowered some growth forecasts in response to the most recent further escalation of the trade conflict between the US and China. While negotiations were still ongoing, president Trump suddenly announced a 10% tariff of USD 300 bn worth of US imports from China. China retaliated by allowing the currency to break 7 yuan per dollar and by announcing fewer, not more, agricultural imports from the US. The US then labelled China a currency manipulator’. We do not think the Chinese will want to use the exchange rate without limits as a weapon in this war. But it is clear that they let the currency weaken somewhat from time to time. When the negotiations broke down unexpectedly in May, the yuan moved quickly from 6.70-6.75 to just above 6.90. It is always hard to assess whether moves in the yuan are market driven or driven by the policymakers, it is clear that the policymakers could have resisted these moves.