US-China Pact Eases Trade War Tensions, but Tariff Risks Remain, Says BlackRock

US-China Trade Pact Eases Tensions, but Tariff and Supply Chain Risks Persist, Says BlackRock

The recent US-China trade pact represents a major de-escalation in the ongoing trade conflict between the world’s two largest economies, according to a client briefing from BlackRock, the world’s largest asset manager.

While the agreement signals a cooling in trade tensions, BlackRock warns that tariffs are likely to remain a drag on economic momentum. The firm anticipates that renewed tariff pressures could still lead to supply-side-driven quarterly slowdowns, particularly in sectors sensitive to global trade flows and manufacturing inputs.

Despite this, BlackRock believes the broader impact on U.S. economic activity in 2025 could be more muted. The pact offers an indication of where the effective U.S. tariff rate might stabilize in the near term, providing some clarity to investors and businesses navigating an uncertain policy environment.

“Supply chain disruptions will continue to drive U.S. inflation and weigh on growth,” the note states, “but they may also prevent a full-scale economic downturn in 2025 by forcing domestic resilience and adaptation.”

The outlook remains "risk-on" for equity markets, as corporate earnings continue to play a pivotal role in shaping sentiment. However, volatility driven by trade policy, input costs, and logistics issues is expected to remain a key theme throughout the year.