China's 10-year government bond yield decreased to approximately 1.70% on Friday as investors sought safer investments amid mounting concerns following US President Donald Trump's announcement of new tariffs. President Trump introduced a 10% baseline global tariff and imposed retaliatory duties of up to 41% on countries lacking formal trade agreements. Furthermore, he announced a 40% tariff on goods that might be rerouted through third-party countries to bypass existing tariffs.
Meanwhile, the US and China concluded a third round of trade negotiations this week. US Treasury Secretary Scott Bessent remarked that the discussions "have the makings of a trade deal," with an August 12 deadline looming for both countries to decide on extending the current pause on tariffs. In China, both private and official reports indicated a contraction in manufacturing activity for July, with official data reporting the most significant decline in six months. These reports suggest declining demand and a deceleration in economic momentum as the third quarter commences.
