Stocks have declined sharply in recent days as the U.S. announced new tariffs on China, and China responded by allowing its currency to depreciate against the dollar. The escalation of U.S.-China trade tensions has once again raised questions about how and when the conflict will be resolved. In a recent commentary, Capital Group portfolio manager Steve Watson shared his long-term view of the dispute and the implications for investors.
This article was originally published on May 13, 2019. It has been updated to reflect market activity.
Q&A with portfolio manager Steve Watson
Living in Hong Kong with a view of the Chinese mainland, Capital Group portfolio manager Steve Watson has a front-row seat to the long-running U.S.-China trade dispute. He’s noticed a contrast between the consensus view that China’s economy is alarmingly slow and the picture he sees walking the streets of Beijing, Shanghai, Shenzhen and elsewhere.
“As an investor, it’s useful to be a regular visitor to China and see the crowded shops and restaurants,” Watson explained. “When you observe China from afar, it’s easy to imagine a country that is hunkered down, suffering from a prolonged trade war. But it certainly doesn’t feel that way in person. I think people are frustrated by the politics, but life goes on and business keeps moving forward.
Given the recent flare-up in U.S.-China trade relations, with threats of punishing new tariffs coming from both sides, Watson offered his thoughts on the sensitive negotiations, the potential impact on global equity markets and his long-term outlook for Chinese equities.