Morning Note: Tariff Deadlock Grips US-China Trade; Alphabet's Report Looms; BOJ Dilemma

Can U.S. and China Break the Tariff Deadlock?

On Wednesday, U.S. Treasury Secretary Scott Bessent stated that trade negotiations between the United States and China cannot move forward unless both countries reduce their excessive tariffs. However, he emphasised that President Donald Trump has no intention of unilaterally lowering tariffs on Chinese imports. Bessent commented during the International Monetary Fund and World Bank annual meetings, where he stressed that easing trade tensions is essential for rebalancing the economic relationship between the world's two largest economies.

When explicitly asked about the steep 145% U.S. tariffs on Chinese goods and China's 125% tariffs on U.S. products, Bessent responded, “I think that has to be the case, because neither side believes these levels are sustainable.” He added that such extreme tariffs are akin to an economic embargo and warned that a complete breakdown in trade relations would not benefit either country.

(US100 Index Daily Chart, Source: Trading View)

From a technical analysis perspective, the US 100 index has been in a bearish trend since mid-February 2025, as indicated by a pattern of lower highs and lower lows. If it closes above the swap zone between 19,000 and 19,200 in the near term, it may potentially surge upward to retest the resistance zone at 20,300 – 20,500. Conversely, if the index is rejected at the swap zone with bearish momentum, it could potentially move lower.

Investors Await Alphabet Earnings Report

Alphabet is expected to report strong first-quarter results, driven by sustained growth in AI demand. Revenues are projected to reach $75.53 billion, an 11.7% increase year-over-year, while earnings per share (EPS) are estimated at $2.01, up from $1.89 last year. Google Cloud is set to benefit from the accelerating adoption of cloud-based AI services, which are forecasted to grow at a 30% annual rate through 2032.

However, emerging risks could weigh on future performance. Although the Trump administration’s recently implemented tariffs are unlikely to affect Alphabet’s Q1 earnings, they could have broader implications in the near term. Companies facing higher import costs may cut spending on AI and cybersecurity services, potentially impacting Google Cloud revenues. Additionally, the growing popularity of large language models (LLMs) like ChatGPT could reduce engagement with platforms such as YouTube and Google Search, posing a challenge to Alphabet’s advertising revenue streams.

(Alphabet Share Price Daily Chart, Source: Trading View)

From a technical analysis perspective, Alphabet’s share price has been in a bearish trend since the beginning of February 2025, as indicated by a series of lower highs and lower lows. Over the past two weeks, the price has been oscillating between the support zone of 146 – 149 and the resistance zone of 163 – 166. If it breaks above the resistance zone in the near term, it suggests that the bullish structure remains intact, and the price may potentially move higher. Conversely, a break below the support zone might drive the price lower, with a possible retest of the order block in the 130–133 range.

BOJ’s Next Move in Doubt Amid Trade Uncertainty

According to a senior International Monetary Fund official, the Bank of Japan will likely delay further interest rate hikes as heightened uncertainty about U.S. tariffs increases the downside risks to Japan’s economic growth and inflation outlook. The uncertainty surrounding U.S. trade policy and possible retaliatory responses from other nations could dampen business sentiment and discourage some companies from maintaining wage increases, factors critical to supporting domestic demand and inflation.

Earlier this year, the BOJ ended its decade-long ultra-loose monetary policy by raising its short-term interest rate to 0.5%, believing the economy was nearing a sustainable path toward its 2% inflation target. While Governor Kazuo Ueda indicated the central bank's willingness to continue raising rates, the complications introduced by U.S. President Donald Trump’s tariffs have made the timing and scale of future rate hikes more challenging to determine.

(USD/JPY Daily Chart, Source: Trading View)

From a technical analysis perspective, the USD/JPY currency pair has been in a bearish trend since the beginning of January 2025, as evidenced by a series of lower highs and lower lows. Recently, the pair rebounded from the previous swing low at 140.00, retested the swap zone between 143.50 and 144.00, and was temporarily rejected. However, if it manages to close above this zone in the near term, it may potentially rise further to retest the resistance area between 147.70 and 148.20.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.