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Tariff Trouble: US and China Face Off

A trade storm is brewing between the United States and China, threatening to shake up the global economy. US President Donald Trump has announced a new 10% tariff on Chinese imports, set to take effect on March 4. Coming shortly after earlier duties imposed this month, this latest move—linked to concerns over drug flows from North America—took both nations by surprise. China’s Ministry of Commerce responded swiftly, pledging to use “all necessary measures” to protect its interests. This back-and-forth has sparked worries of a full-blown trade war between the world’s two economic powerhouses.

The news rattled markets. In Hong Kong, Chinese company stocks dropped as much as 3.9%, while the mainland’s CSI 300 Index fell 1.9%, reflecting growing nerves among investors. China’s currency, the offshore yuan, edged up slightly to 7.29 against the dollar, thanks to efforts by China’s central bank to keep things steady. With the National People’s Congress just days away, Beijing is gearing up to tackle these challenges. Leaders have promised to encourage more spending at home and work to calm jittery housing and stock markets, hoping to soften the blow of these trade tensions. The effects could ripple far beyond Asia. Higher tariffs might mean pricier goods for shoppers and tougher times for businesses worldwide. Both sides seem dug in, and if China retaliates, the stakes could climb even higher.

Loan Lockdown: Japan Targets Risky Bank Deals

Japan’s money watchdog, the Financial Services Agency (FSA), is cracking down on a booming $67 billion trend where banks buy loans tied to government bonds. These deals, popular with smaller regional banks, have grown 20-30% in a year, even after a warning in January 2024. The FSA, led by Toshinori Yashiki, says these loans are risky and hard to figure out, and some banks aren’t handling them safely.

Banks lend cash to special companies that buy government bonds, then get paid back with extra from tricky add-ons. These loans hide losses when interest rates jump, unlike owning bonds outright. But if things go wrong, banks could lose more than they earn from customer savings. The FSA worries banks are using these to look busier or dodge showing losses, not to help local communities.

Bank stocks dipped about 2% in Tokyo after the news, matching a wider market drop. The FSA plans to check banks and the brokers pushing these deals, pushing for clearer info to avoid trouble. Smaller banks like them because they’re easy, but experts say they need better know-how to manage risks.

Russia Revival: Investors Eye a Sanctions Shift

Investors are eagerly positioning themselves for a potential easing of US sanctions on Russia, spurred by a possible breakthrough in Ukraine peace talks. With President Donald Trump hinting at lifting restrictions, excitement is building. In Hong Kong, shares of Rusal, a major Russian aluminium firm, have soared over 50% this month. In Europe, stocks of banks like Raiffeisen and OTP, both still active in Russia, have climbed 35% and 10% this year. Even Kazakhstan’s currency, the tenge, has gained 4%, boosted by its close trade ties with Russia.

Within Russia’s closed-off markets, the ruble has surged 15% since January, and local stocks are thriving—though only residents and investors from friendly nations like the UAE can currently participate. In New York, securities lawyer Grigory Marinichev reports a flurry of calls from eager clients, but with billions still locked under sanctions, he advises patience and vigilance. Yet caution lingers. Experts note that unwinding sanctions is complex, tied up in US laws and European policies, and could take years. While some see a golden opportunity, others, like Alexandra Morris, who faced losses when Russia was isolated, remain sceptical of quick gains.