Article last updated 30 September 2025.
After months of playing hardball with China over trade, President Donald Trump has offered to intervene in a Commerce Department ruling that has crippled a Chinese telecommunications giant.
ZTE, the world’s fourth-largest handset manufacturer, was found to have evaded US sanctions on Iran and North Korea so last month the US Commerce Department banned American parts suppliers from working with the company. This destroyed the business’s supply chain and led the company to halt trading virtually overnight. At the weekend, Mr Trump tweeted that he was working with Chinese President Xi Jinping to get the company “back in business, fast”. Too many jobs would be lost in China, so he had told the Commerce Department to “get it done!”. This is a remarkable reversal from Mr Trump’s administration, particularly as ZTE was cut off partly for national security reasons. The firm, along with Huawei, has long been seen as a Trojan horse by the West. Spymasters in London and Langley believe these companies could be co-opted by the Chinese state and used to tap into and disrupt telco networks built using Chinese hardware and equipment.
What Trump’s latest move does show is that there is more dialogue at the highest level between the two superpowers than it first appears. This may increase the chances of a de-escalation in trade tensions between the two. We have long believed that it’s best to ignore Mr Trump’s bombastic rhetoric and instead try to focus on what he actually does. It’s very hard to do – particularly when markets tend to take his every word as gospel – but it seems to us the most prudent path.
A wheeler-dealer by trade, Mr Trump is used to using every available tool he has to bulldoze his way forward and gain the upper hand in the deal in front of him. He typically pushes hard and early, giving him the option of conceding ground magnanimously to seal an agreement. Most presidents are from a different mould: they use softer power where possible because of the prevailing belief that overuse of certain tools – sanctions, threats and political pressure – erodes their power in the long run. This theory is also a nod to the tangled reality of geopolitics. Any decision you make, especially overtly, has ramifications for allies, enemies and others who could soon become either.
Realpolitik aside, most people usually like bombastic language. It’s forthright, confident and speaks on their level. Nuances are difficult to explain and require attention; most people are too tired from working and raising families to grapple with complicating details. They just want their leaders “to get it done”. The thing with economics is, in the short to medium term it pretty much always comes back to optimism versus pessimism. It’s the difference between spending today or saving, starting a business, buying a home or even starting a family. You’re more likely to hustle for a pay rise when the boss knows there’s more jobs on offer than people to fill them.
Unlike the British, Americans see the president as the embodiment of their country. And when the US made flesh is bombastic, thrusting and confident, perhaps the nation feels that way too. US consumer confidence hit a 14-year high in March and remains elevated, the NFIB Business Optimism Index is as high as it’s ever been since it started in the 1970s. Mr Trump’s approval ratings have jumped higher in recent months too. Confidence begets confidence, which is all markets need in the short term. They only need sober policies and fiscal prudence in the long term.
Source: FE Analytics, data sterling total return to 11 May
Poor Argentina
Argentina has petitioned the IMF, asking for credit to help it stabilise the peso which has fallen almost 60% since December 2015.
The nation seems lost in a different age. At a time when interest rates are incredibly low and even 3% inflation seems excessive, Argentina sports 40% rates and overshoots its 15% inflation target by seven percentage points. The country is in dire straits despite the liberalisation programme of President Mauricio Macri.
The recent appreciation of the dollar has combined with US trade policy changes that have hurt Argentine growth expectations and spooked investors. The catalyst could have been the central bank’s recent increase in its inflation target from 12% to 15%. Ironically this was done because the government was worried about the economy’s ability to grow if interest rates were much higher. After the fallout interest rates are now more than 10 percentage points higher. The nation’s primary budget deficit was 3.9% last year and Mr Macri had hoped to reduce that to 2.7% to reassure investors. It wasn’t enough.
Argentina has been beggared by a century or more of poor leadership and crippling economic policies, both on the right and the left. With little domestic capital to call upon, the country is heavily reliant on foreign investors to finance growth, albeit external debt relative to GDP is much lower than it was in the early 2000s. With about 40% of GDP in foreign debt, most of it dollar-denominated, the nation is highly exposed when its currency falls precipitously. With repayments getting more onerous by the day, it doesn’t take much for investors to sell up and run. And that quickly becomes a run.
Argentina is probably on the cusp of another period of gloom, but we think its problems are unlikely to spread to other emerging markets. Many of the most indebted countries are large oil producers, which gives them a helpful support for repayments. Argentina does have the second-largest shale gas reserves in the world, but its industry is underdeveloped and underinvested. Also, other emerging countries’ are less dependent on foreign financing and their current accounts are in better shape.
Bonds
UK 10-Year yield @ 1.44%
US 10-Year yield @ 2.97%
Germany 10-Year yield @ 0.56%
Italy 10-Year yield @ 1.87%
Spain 10-Year yield @ 1.26%
Economic data and companies reporting for week commencing 14 May
Monday 14 May
Interim results: Cerillion, Diploma, Lonmin, Victrex
Quarterly results: Dignity
Trading statement: Centrica
Tuesday 15 May
UK: Claimant Count
US: Business Inventories, Retail Sales
EU: GDP (Preliminary), Industrial Production; GER: GDP (Preliminary)
Yearly results: Animalcare Group, Braemar Shipping Services, BTG, DCC, Land Securities Group, Premier Foods, Vodafone Group
Interim results: CYBG plc (CYBG), EasyJet, Patisserie Holdings
Quarterly results: Georgia Healthcare Group
Trading statement: Hargreaves Lansdown, Spirax-Sarco Engineering
Wednesday 16 May
US: MBA Mortgage Applications, Building Permits, Housing Starts, Capacity Utilisation, Industrial Production
EU: Consumer Price Index; GER: Consumer Price Index
Yearly results: Burberry Group, C & C Group, Speedy Hire
Interim results: Brewin Dolphin, Marstons, Mitchells & Butlers, SSP Group
Trading statement: Charter Court Financial Services Group, Crest Nicholson Holdings, Galliford Try, Mondi, National Express, STV Group
Thursday 17 May
US: Continuing Claims, Initial Jobless Claims, Philadelphia Fed Index
EU: Balance of Trade
Yearly results: British Land, Experian, Mothercare, National Grid, Royal Mail, Sophos Group
Interim results: Countryside Properties, Euromoney Institutional Investors, Future, Grainger, Thomas Cook Group
Quarterly results: TBC Bank Group
Trading statement: Hill & Smith Holdings, Just Group
Friday 18 May
EU: GER: Producer Price Index, Wholesale Price Index
Quarterly results: AstraZ
Julian Chillingworth
Chief Investment Officer