Tracking the ripple effects of US-China trade tensions

China powers ahead in EV sales but faces slowing growth

What the chart shows

This chart shows the monthly sales and year-over-year (YoY) growth trends of China's electric vehicles (EV), segmented into battery EVs and plug-in hybrid EVs. Fuel cell EVs, while included in the data, are not visible due to their low sales volumes. The upper pane shows absolute sales volume in millions, while the lower pane highlights YoY growth rates.

The chart aims to provide a view of the evolution of China’s EV market, including shifts in the contribution of different types of EVs to total sales and growth.  

Behind the data

Despite international curbs on Chinese EV exports, driven by concerns about potential unfair advantages from government subsidies, domestic EV sales have continued to expand. The upper pane reveals that BEVs remain the biggest contributor to China’s EV sales volume, though PHEVs are playing an increasingly significant role. China's share of the global EV market has risen to 76%, reinforcing its position as a global leader in EV adoption. 

However, the YoY growth rates have moderated over time, largely due to a slowdown in BEV sales, as the lower pane indicates. This deceleration reflects a maturing market and potential saturation in domestic demand for BEVs.  

US reduces dependence on Chinese tungsten

What the chart shows

This chart illustrates the shares of US tungsten imports by major supplier countries. It compares recent shares (12-month moving average as of August 2024) with those from three and five years ago, while also showing historical percentile ranges and median values for each country.  

This chart aims to highlight shifts in the US’s tungsten import dependencies and its efforts to diversify suppliers over time.  

Behind the data

Tungsten, also known as Wolfram, is a critical metal used in aerospace, defense and electronics applications, making it a strategic commodity in US-China trade relations.  The US has historically relied heavily on China for its tungsten supply, creating potential supply chain security vulnerabilities.  

Since the 2018 US-China trade war, the US has actively worked to diversify its tungsten imports. This effort is reflected in the chart, which shows declining import shares from China and rising contributions from alternative suppliers such as Canada and Germany.  

Trade tensions have also influenced tungsten markets, with the US imposing tariffs on Chinese imports and China restricting tungsten exports to the US. A tungsten mine reopening in South Korea, reported to have secured a long-term supply contract with the US, could help alleviate the situation.

China's credit slowdown signals challenges ahead for EURUSD

Leveraging Simon White's chart

What the chart shows

This chart shows the YoY growth of EURUSD (dollar per euro) and China's 12-month rolling sum of total social financing (TSF), a broad measure used to capture the total amount of financing provided to the real economy that serves as a critical indicator of credit and liquidity conditions in the Chinese economy.

The relationship is further explored by detecting a six-month lead of China’s credit growth ahead of EURUSD, shaded in grey to indicate the 95% confidence interval based on China’s loan growth trends.

This chart aims to shed light on the interplay between China’s credit dynamics and the EURUSD exchange rate, offering insights into potential future movements in the currency pair.

Behind the data

China remains one of Europe's top trading partners, with China being the EU's third-largest export destination and the EU holding the largest trade deficit with the country. A strengthening Chinese economy could boost demand for European imports, potentially lifting EURUSD. However, current economic conditions in China introduce uncertainties. 

This chart reveals a recent slowdown in China’s credit growth, with banks being the primary contributors while non-bank lending remains subdued. These developments may put downward pressure on EURUSD.

Southern Europe and France drive euro area growth

What the chart shows

This chart shows the annual GDP growth of the Euro Area 20 (which includes Croatia’s membership from January 2023) from Q3 2010 to a projection in Q1 2025. The bars represent contributions of different regions – Germany, France, Northern Europe (northern euro area) and Southern Europe (southern euro area) – while the orange line tracks total GDP growth for the euro area.

Behind the data

Economic performance in the euro area has been uneven, reflecting disparities in inflation levels and growth dynamics across member states. Inflation peaked at 25% in some Southern European economies while remaining as low as 6% in others. As inflationary pressures ease and the European Central Bank pivots to rate cuts, GDP growth is being led by Southern Europe and France. In contrast, Germany and Northern Europe are grappling with negative annual GDP growth, underscoring the challenges facing the bloc’s industrial and export-driven economies.  

Tech stocks lead market volatility while financials stabilize

What the chart shows

This chart illustrates the Beta coefficient (β) for all S&P 500 sectors over time, using a one-year rolling calculation. The Beta coefficient measures a sector’s volatility relative to the overall market, typically represented by the S&P 500, which has a beta of 1.0.

A beta higher than 1.0 indicates that the sector is more volatile than the market, often reflecting a greater sensitivity to market movements.

A beta lower than 1.0 suggests less volatility, characteristic of more defensive sectors that provide stability during market fluctuations.

In our analysis, we highlight the betas of the Information Technology and Financials sectors for comparison, while the betas of other sectors are shown in grey for context.

Behind the data

The ongoing rally in the “Magnificent 7” group – led by companies such as Tesla and Nvidia – has positioned the Information Technology sector as the most volatile relative to the broader market, represented by the S&P 500. This heightened volatility mirrors patterns seen during the dotcom bubble of 1998–2001, though it is still too early to confirm similar systemic risks.

In contrast, the Financials sector appears to have tempered its volatility, now exhibiting a beta lower than 1.0. This suggests a divergence in market dynamics: while high-growth tech stocks are dominating market movements, financial stocks remain relatively stable, reflecting subdued volatility and a focus on steady performance amidst changing market conditions.

Trade surpluses fail to boost EM currencies despite positive link

What the chart shows

This scatter chart shows the relationship between emerging-market (EM) trade balances with the US (as a percentage of GDP) and the corresponding currency performance against the USD over the last 12 months. It also displays a cross-EM exponential trend line, with a 95% confidence band illustrating the range of expected variations around the trend.

The chart aims to explore how trade dynamics between EM economies and the US correlate with currency movements. For example, the Thai Baht (THB) and Taiwanese Dollar’s (TWD) position on the far right of the chart reflect large trade surpluses with the US, yet their flat currency performance against the USD suggests other dominant factors at play.

Behind the data

EM foreign exchange (FX) rates are typically shaped by a combination of capital flows, policy rate differentials and global risk appetite. However, international trade activity could also play a significant role. This chart indicates a positive trend over the past year between cumulative goods trade balances with the US and EM currency performance against the USD. However, the expected direct link between trade balance surpluses and FX appreciation has been muted, probably due to the Federal Reserve’s hawkish monetary stance, which bolstered USD strength and overshadowed trade-driven currency adjustments. The inclusion of a 95% confidence band further emphasizes that while a trend exists, significant variability arises from other factors impacting EM currencies, such as shifts in risk sentiment or local economic challenges.

Looking into 2025 and beyond, the interplay between monetary policy normalization and broader geopolitical and trade dynamics may redefine this relationship. Should the Fed pivot toward monetary accommodation, EM currencies could experience reduced pressure from a strong USD. Additionally, lingering impacts of tariffs introduced during the new Trump administration may continue to impact EM trade balances and FX trends.