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Gavekal Research
How The EU Is Playing Trump’s Tariffs
Cedric Gemehl
16 May 2025
Like any kid facing team selection in the school playground, the European Union must now be fretting that it will be picked last. After the United States announced a trade deal with Britain on May 8 and agreed a deescalation with China over tariffs on May 12, the EU has been left at the back of the negotiating line with the Americans, says Cedric. In this piece, he explores its approach and its bottom line in any standoff.
Gavekal Dragonomics
Exports And Equities After The Ceasefire
Thomas Gatley
16 May 2025
The US-China ceasefire announced this week is unequivocally positive for both China’s export economy and for stocks, at least in the short run. Thomas unpacks the implications of the agreement, and argues that easing trade tensions and stimulative policy settings will provide strong tailwinds for Chinese equity prices over the next few months—though risks will multiply later in the year.
Gavekal Research
Crude Perversions
Tom Holland
16 May 2025
It may offend against every long-cherished investment tenet you can think of, but in recent months the price of oil has been behaving much like a play on US technology stocks. In recent months the biggest single contributory factor determining oil prices has been the volatility of the US administration’s policymaking, which has had an outsized impact on expectations for
global oil demand.
Gavekal Research
Video: Stablecoins And Dollar Dominance
Will Denyer
16 May 2025
Critics of the Trump administration point to a golden era of corruption emerging in the crypto-currency space, while even supporters are becoming irritated that Trump family dealings are slowing up the passage of enabling legislation that will deepen and broaden the crypto market. In this video interview, Will explores these developments and argues the US government will eventually pass stablecoin legislation.
Gavekal Dragonomics
Carefully Controlling Appreciation
Wei He
Expropriation, Law, And Incentives
Andrew Batson
A Cautious Cut
Wei He
Macro Update: Managing The Trade Chaos
Andrew Batson, Dragonomics Team
Substituting For Secondary Housing
Xiaoxi Zhang
Reforging Supply Chains, Again
Thomas Gatley
The Politburo Holds Fire
Wei He
Taking Stock Of Fiscal Progress
Wei He
How Long Can Subsidies Fuel Auto Sales?
Ernan Cui
Housing Inventories Diverge
Xiaoxi Zhang
More research
Webinar: Escalate To Deescalate?
Arthur Kroeber, Cedric Gemehl, Udith Sikand, Tom Miller
How Does Peru Fit Into Fort Monroe?
Tom Miller
Fifty Ways To Leave Your Lover
Louis-Vincent Gave
How Ukraine Changed The World
Louis-Vincent Gave, Charles Gave
The Dollar’s Many Drivers
Will Denyer, Tan Kai Xian
The US Macro Outlook After Geneva
Will Denyer, Tan Kai Xian
Five Questions After The Geneva Ceasefire
Arthur Kroeber
Mapping Eurozone Repatriation Flows
Cedric Gemehl, August Gudmundsson
Asia’s Potential Repatriation Flows
Udith Sikand
Geoeconomic Monitor: A Tale Of Two Trade Deals
Arthur Kroeber, Tom Miller, Tom Holland
Gavekal Research
Global Strategy: Investing After Exceptionalism
Will Denyer, Tan Kai Xian, Udith Sikand, Thomas Gatley, Cedric Gemehl
30 Apr 2025
The first four months of 2025 have seen a succession of shocks severely damage the narrative of US exceptionalism that has prevailed in global financial markets for the last few years. In this strategy chartbook, Gavekal analysts examine what this diminution of belief in the US means for US markets, and look at which assets and markets outside the US stand to benefit and which to avoid.
Checking The Boxes
Our short take on the latest news
Fact
Surprise
Takeaway
US retail sales rose 0.1% MoM in Apr, compared with 1.7% in Mar
Stronger than 0%; retail sales ex-autos & gas rose 0.2% MoM in Apr, versus 1.1% in Mar
Weakness in growth suggests some pullback in consumption of imported Chinese goods
Eurozone industrial production rose 2.6% MoM in Mar, versus 1.1% in Feb
Stronger than expected 2%; YoY, industrial production rose 3.6% in Mar, versus 1% in Feb
More evidence for stabilization of eurozone manufacturing cycle
India's trade deficit widened to US$26.4bn in Apr, from US$21.5bn in Mar
Deficit wider than US$20.5bn expected; imports (19% YoY) rose faster than exports (9% YoY)
Impact of wider trade deficit on INR likely to be offset by capital inflows
Japanese GDP fell -0.2% QoQ in 1Q25, down from 0.6% in 4Q24
Weaker than expected -0.1%; drag mainly from consumption and net exports
Technical recession possible; BoJ to slow, but not abandon, rate-hiking plans
Test Your Knowledge
US President Donald Trump is proposing to host a dinner for the biggest 220 holders of his $TRUMP memecoin. How much of $TRUMP’s freefloat is held by non-US buyers?
- 12%
- 39%
- 76%
Chart of the Week
The US Federal Reserve sat on its hands last Wednesday. Not so central banks in Europe, which displayed no such caution last week. The Czech, Polish, and UK central banks cut rates, while Sweden and Norway signaled cuts ahead. The contrast reflects the differing impact of the tariff shock on either side of the Atlantic: in the US, tariffs risk stoking inflation, while Europe is facing a deflationary shock.
Open Chart
Gavekal Research
Essential Reading: A Book For Every Week Of The Year
Gavekal is often asked for a recommended reading list. So, here it is: a book a week that everyone interested in the world of macro investing—whether hoary veteran or eager apprentice—can benefit from reading.
Gavekal Research
Webinar: Escalate To Deescalate?
Arthur Kroeber, Cedric Gemehl, Udith Sikand, Tom Miller
16 May 2025
Investors were rewarded on Monday for their bets that a negotiated settlement will be reached in the United States-led trade war. This follows Britain and the US agreeing an outline trade deal, and an Anglo-Indian trade deal, suggesting that the old liberal trading order is not dead. Our team picked through these developments to assess if the trade war is over before it got going.
Tariff Troubles
Geoeconomic Monitor: A Tale Of Two Trade Deals
Arthur Kroeber and Tom Miller look at different benchmark trade deals, one between the US and the UK, the other between the UK and India. In addition, Tom Holland previews Donald Trump’s coming state visit to the Gulf Arab states, and Tom Miller looks at China’s efforts to court Latin America and examines the latest India-Pakistan fighting.
Trade War Triage
When on April 9 Donald Trump suspended his “reciprocal” tariffs on everyone but China to allow 90 days for negotiation, he guaranteed three months of uncertainty. So how should investors proceed in this high-volatility environment, overshadowed by looming policy risk? Some basic trade war triage may help, as in addition to the United States, the rest of the world can be divided into three risk buckets.
Southeast Asia’s Tariffs Dilemma
Southeast Asia’s manufacturing economies are squarely in the crosshairs in the US China trade war. US trade negotiators are pressing them to stop transshipments from China, reduce offshoring by Chinese exporters, and cut their imports of Chinese intermediate goods. This puts the region’s countries in a tricky position, writes Tom Miller, as most are determined not to pick sides in the superpower rivalry.
Geoeconomic Monitor: Waiting For Capitulation
Washington is finally waking up to the fact that Donald Trump overestimated his leverage with China and is now stuck in a trade war that he cannot win. The question is how long it will take to organize a retreat that could pave the way for negotiations with Beijing, and what form this retreat will take, writes Arthur Kroeber. Meanwhile, Tom Miller examines the US proposal to impose port fees on Chinese-owned ships and looks at the hurdles still facing the sale of CK Hutchison’s global ports business.
US economy & markets
The Dollar’s Many Drivers
The US dollar has rallied this week, breaking its year-to-date downtrend as investors went risk-on after the US and China agreed a partial tariff ceasefire. While it might seem incongruous that the US dollar—long a safe haven—now behaves like a risk-on asset, this upward move makes some sense. Will and Kai Xian break down the drivers of the dollar in the coming months and conclude that its trajectory still looks tilted to the downside in the long term.
The US Macro Outlook After Geneva
The US and China agreed Monday to step back from the brink of economic decoupling. This is welcome news for the global economy and markets, say Will and Kai Xian. But US tariff rates—on Chinese and other goods—are still at multi-decade highs, and policy uncertainty remains elevated. Given this situation, they ask what it all means for the US macro outlook.
Will Trump Encourage Legal Immigration?
The Trump administration is providing incentives for illegal immigrants to “self deport”. A scheme announced on Monday will grant sign-ups a one-way plane ticket from the US plus a US$1,000 cash bonus. Yet President Donald Trump says such deportees could return to the country through legal channels, “if they’re good people”. There are solid economic reasons to think that Trump’s offer of a potential return is genuine, says Kai Xian.
Trump And Mr. Too Late
The US Federal Open Market Committee assembles Tuesday and Wednesday for its first meeting since Donald Trump’s April 2 tariff grenade and his April 17 threat to fire Federal Reserve boss Jay Powell for not cutting interest rates. How will the Fed determine monetary policy in this environment of heightened economic uncertainty and increased political pressure? Will Denyer examines what’s at stake.
China chartbook
Gavekal Dragonomics
Macro Update: Managing The Trade Chaos
Andrew Batson, Dragonomics Team
6 May 2025
China’s attempt to stabilize its economy has been rudely interrupted by the sudden escalation of the US-China trade conflict into a near-embargo. No one thinks the current 100%+ tariffs are sustainable, but the off-ramp is not yet obvious. China’s government had already planned for a substantial fiscal stimulus, and has made clear it is prepared to do more if needed—but is not rushing to act. In our latest quarterly chartbook, Andrew and the Dragonomics team assess the economic fundamentals and explains China’s policy options for managing the trade chaos.
India chartbook
Gavekal Research
India Macro Update: The Road To Recovery
Udith Sikand, Tom Miller
7 Mar 2025
After slowing for four consecutive quarters, India’s economy is showing signs of perking up. GDP growth is back above 6%, buoyed by a monetary policy easing and healthy household consumption. Tax cuts will also help at the margin. But a dramatic acceleration in growth is unlikely, as the public infrastructure boom fades and private investment continues to disappoint.
Latest video
Gavekal Research
Video: Stablecoins And Dollar Dominance
Will Denyer
16 May 2025
Critics of the Trump administration point to a golden era of corruption emerging in the crypto-currency space, while even supporters are becoming irritated that Trump family dealings are slowing up the passage of enabling legislation that will deepen and broaden the crypto market. In this video interview, Will explores these developments and argues the US government will eventually pass stablecoin legislation.
Strategy Chartbook
Gavekal Research
Global Strategy: Investing After Exceptionalism
Will Denyer, Tan Kai Xian, Udith Sikand, Thomas Gatley, Cedric Gemehl
30 Apr 2025
The first four months of 2025 have seen a succession of shocks severely damage the narrative of US exceptionalism that has prevailed in global financial markets for the last few years. In this strategy chartbook, Gavekal analysts examine what this diminution of belief in the US means for US markets, and look at which assets and markets outside the US stand to benefit and which to avoid.
Emerging markets
Video: Are EMs Back?
It’s been a good quarter for the broad emerging markets complex. The MSCI EM index has returned almost 7% in US dollar terms, while US equities are down by some -3.5%. So should investors jump on the EM train? Udith points out that there is a wide divergence in the performance of individual emerging markets, and the threat of tariffs hangs heavy over EM corporate earnings. Investors need to be selective.
Video: Southeast Asia Under Trump 2.0
Global investors are rightly focused on the potential losers from the United States pursuing an aggressively protectionist trade policy agenda, but there may be winners as well. Tom went in search of such economies last week. Today he explains how such “swing states” are likely to perform in an intensified period of great power rivalry between the US and China.
China Turbocharges EM Investment
As the rich world pulls up the protectionist drawbridge, investors risk missing a bigger story
in emerging markets. Here, Chinese outbound investment is rebounding after the fallow Covid years, and is driving a new wave of industrialization that promises to lower the cost of the green-energy transition.
Why This Time Has Been Different
During past episodes of risk-off volatility, the correlation between emerging market risk assets has shot up. But early August’s bout of market volatility saw a bifurcation in EMs, and no broader macroeconomic spillover effects—which speaks well of the growing maturity of emerging markets as an asset class.
Europe's economy
How The EU Is Playing Trump’s Tariffs
Like any kid facing team selection in the school playground, the European Union must now be fretting that it will be picked last. After the United States announced a trade deal with Britain on May 8 and agreed a deescalation with China over tariffs on May 12, the EU has been left at the back of the negotiating line with the Americans, says Cedric. In this piece, he explores its approach and its bottom line in any standoff.
Mapping Eurozone Repatriation Flows
Today’s Daily considered the potential level of portfolio capital that could be repatriated into Asian economies from the United States. In this piece, Cedric and August ask the same question from a eurozone perspective. They conclude that the eurozone’s improving macro fundamentals, in addition to the febrile effects of US policymaking favor a continued movement of capital back to Europe.
Europe’s Full-Throated Easing
The US Federal Reserve sat on its hands Wednesday. Not so central banks in Europe, which displayed no such caution. The same day, the Czech National Bank and the National Bank of Poland cut their policy interest rates, followed on Thursday by the Bank of England. This divergence reflects the differing policy calculus on either side of the Atlantic.
Merzschmerz
It is said that the Germans have a word for everything. So perhaps the word that best captures the political drama that unfolded in Germany’s parliament Tuesday would be Merzschmerz. This describes the pain—der Schmerz—Friedrich Merz must have felt when he became the first ever candidate for chancellor of the Federal Republic to fail in the first-round parliamentary vote for the post.
Currencies
Carefully Controlling Appreciation
Asia’s Potential Repatriation Flows
One Country, Two Currencies
Conversation: The Six Sigma Event In Asian Forex
Yen Strength Is Here To Stay
The Implications Of Euro Strength
Oil & commodities
Crude Perversions
Video: Oil Market Game Theory
Geoeconomic Monitor: The Tariff Power-Play
What We Don’t Talk About When We Talk About Ukraine
The Upside Surprise In Commodity Demand
The Trouble With Energy Dominance
