Soochow Securities released a macro commentary report. From January 27 to February 3, the overseas market was steered by risk aversion triggered by two main themes: DeepSeek and Trump's new tariff policy. US stocks and commodities declined, while US bonds and the USD Index advanced, and gold hit a record high. Looking ahead, the launch of DeepSeek may pose a challenge to the past “buy on dips” strategy for US stocks, whereas tech stocks have wrought uncertainty and higher volatility to US bourse.

In terms of Trump's new tariff policy, the pace has slightly excelled expectations. In the short term, attention will be paid to the progress of coordination between China and the US in response to tariffs. From a full-year perspective, it is expected that there will still be many pushes and pulls in Trump's tariff policy.

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This year's US tariffs on China are likely to be progressive; however, after Trump completes the promotion of immigration and tax reduction policies in 2025, the tariff policy is likely to be Trump's most important political chip before the midterm elections in November 2026. The broker forecast that Trump is very likely to fully honor his 60% tariff pledge in 2026.

In terms of the impact of the tariff hike, for China's domestic exports, the short-term implementation of a 10% tariff and the expectation that a higher tariff of even 60% will ultimately be enforced are expected to continue to fortify domestic companies' behavior of “rushing for exports”.

In the short to medium term, the RMB exchange rate will be underpinned by the current account. In terms of US inflation and Fed policy, a quantitative analysis during the first round of trade frictions between China and the US in 2018-2019 suggested that the impact of US tariff hikes was borne half by the exchange rate, one-third by China's PPI, and one-sixth by the US PPI. The US core goods CPI only bore one-ninth of the impact, and the overall CPI fell during the period due to falling oil prices. Therefore, tariffs are unlikely to have a radical inflationary effect on the US in the short term.

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Hence, based on the Fed's current policy of "taking one step at a time", it is predicted that the inflationary expectations caused by tariffs in 1H25 will not have a material direct impact on the Fed's monetary policy.