Investing.com - An ongoing pause to tariffs between the U.S. and China should be be viewed as "overly positive" for the Chinese economy and domestic companies, according to analysts at Jefferies.
On Monday, Washington and Beijing announced that they had reached an agreement that would slash their sky-high respective tariffs on each other and halt the levies for 90 days.
The move comes after U.S. President Donald Trump slapped soaring duties of at least 145% on China, leading Beijing to respond with its own retaliatory tariffs of 125%.
But writing in a note to clients, the analysts at Jefferies led by Aniket Shah flagged that economic policy uncertainty in China has risen, matching the level in the U.S. for the first time since February.
The brokerage was citing the Economic Policy Uncertainty Index, a data set overseen by researchers from Northwestern (NASDAQ:NWE) University and Stanford University that factors in newspaper coverage of policy-related economic uncertainty, U.S. federal tax code provisions that are set to expire, and a survey of professional forecasters from the Federal Reserve Bank of Philadelphia.
In April, the index for China, which along with the U.S. trade spat has been grappling with sluggish consumer sentiment and a property sector crisis, rose by 23% to a reading of 525. Beijing has recently rolled out stimulus measures aimed at helping bolster economic activity, although it is unclear if more aid is still to come. Meanwhile, the U.S. edged up by 8% to 529.
This convergence with the U.S. could be a signal that the policy landscape in China is becoming murkier, the Jefferies analysts added.
"Thus, we caution against viewing the 90-day pause on reciprocal tariffs as overly positive for the Chinese economy and firms with Chinese exposure until the economic policy environments stabilize," they wrote.