BNP Paribas Says Cold Tech War Will Remain even if US-China Reach a Deal

As the trade war between China and the United States continues, the ongoing tariff battle remains an important risk facing markets.

That will eventually fade once the two countries reach a provisional deal, according to a BNP Paribas economist, but they’ll leave behind a “cold tech war.”

American trade negotiators will soon head to China for face-to-face talks as the world’s two largest economies try to strike a deal, sources told CNBC.

“We’re likely to get a temporary agreement in the coming months,” said Chi Lo, senior economist at BNP Paribas. He told CNBC’s “Street Signs” on Friday that if Beijing and Washington can agree to a temporary deal then they can “set the stage for longer-term negotiation on more deep-rooted issues.”

U.S. President Donald Trump has been using tariffs as a tool to address issues beyond trade, including national security issues and technology transfer threats.

Lo said, given his expectation of a temporary pact, the continued trade war will no longer have such a big impact on “the macro risk in terms of market volatility,” in the coming months.

But the affect of the trade dispute will linger on and hurt tech, Lo said. He predicted that disagreements in the technology sector will probably get even “colder” in the coming months — or even coming years.

“There will be more focused trade war risk on the tech sector going forward. But then the overall market sensitivity to overall trade war risk may fade a bit,” said the economist.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza