Haitong International: Trump's tariff objectives force the Federal Reserve to cut interest rates, expecting A-shares to face wide fluctuations in the medium term
Haitong International released a research report indicating that Trump's main purpose of imposing tariffs is to force the Federal Reserve to cut interest rates, aiming to guide the return of manufacturing and potentially trigger a stock market crash. In the short term, the Chinese stock market faces limited risks, and it is expected that performance improvements in the first quarter will drive a rebound. In the medium term, as internal contradictions in the United States deepen, the stock market will be under pressure, which may lead to wide fluctuations in the Chinese stock market. In the long term, with breakthroughs in Chinese technology and the economic cycle rebounding, profits will drive the Chinese stock market into a major rally
According to the Zhitong Finance APP, Haitong International released a research report stating that the main purpose of U.S. President Trump’s tariff increase is not to raise revenue, but to force the Federal Reserve to lower interest rates, guide manufacturing back to the U.S., and even intentionally trigger a stock market crash to impact the global financial system. With the economy still performing well, Trump's tariff increase is not so urgent; it is merely a means to address the current difficulties in the U.S. Therefore, Trump continues to urge the Federal Reserve to cut interest rates in hopes of resolving the U.S. debt crisis.
Regarding the Chinese stock market, the firm believes that short-term systemic risks are limited. After the stock market accelerates its bottoming process, the negative factors will be exhausted in the short term, and favorable domestic policies are expected. As liquidity issues ease, the market's focus will shift back to earnings disclosures. The firm anticipates signs of improvement in first-quarter earnings, which will drive capital back into the market, leading to a rebound.
In terms of the medium term, the firm points out that there is a possibility of further deepening internal contradictions in the U.S., such as the California governor opposing tariff policies, U.S. Treasury Secretary Mnuchin wanting to resign, and large-scale public protests; under the framework of U.S.-China confrontation, the decline in the U.S. stock market corresponds to a decrease in global risk appetite. Trump will not ease his stance until he achieves his goals, thus the stock market remains under pressure, and the Chinese stock market also faces wide fluctuations.
In the long term, the firm believes that after the market reshuffling brought about by the crisis ends, Trump will gradually shift his focus to economic growth. The firm still believes that with breakthroughs in Chinese technology, a boost in domestic demand, and an economic cycle recovery, profits will drive the Chinese stock market into a major rally