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Tensions between the US and China have likely peaked, Claudio Irigoyen, head of global economics at Bank of America Global Research, said Wednesday.
“In general, we’ve seen the worst in terms of escalation,” he said at Semafor’s World Economy Summit in Washington, DC. “So we should see more de-escalation from here — the pace will depend on the relative pain on the economy in China versus the US.”
Trump has said in recent days that he’s prepared to reduce tariffs on China, while cautioning that they won’t be eliminated completely.
Irigoyen said that while China must deal with deflationary pressure and an economic slowdown, it has different incentives than the US. The Chinese government is not dealing with stagflation, he said, nor with elections — two important factors informing trade talks.
But China faces its own structural problems, he noted. The country needs to rebalance its economy away from real estate, he said, which has locked buyers into expensive assets and depressed consumer confidence since the COVID-19 pandemic.
Irigoyen said that Chinese consumers need a new place to invest their savings. “It cannot be back to real estate, because it doesn’t work. And the Chinese know it and feel it and feel that kind of the social contract didn’t work because they were sort of induced to save in real estate,” he said.
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Irigoyen said that he expects the US to strike trade deals with other nations before China. It will likely take several months for Beijing to secure an agreement, he said.
“We were assuming that Trump is going to take about three months to really sit seriously on the table,” Irigoyen said. “There will be some trade deals that will come faster than the China one, probably Japan, probably India. India will be a perfect example of a comprehensive trade deal involving defense, energy, and trade. And I think this administration needs to show quick wins.”
Trump’s tariffs and their stop-and-start rollout prompted the Bank of America to lower its global growth forecast earlier this week. The bank cut its global GDP forecast 0.3 percentage points to 2.8% for this year. It slashed its forecast for 2026 by 0.2 percentage points.
“The Trump tariff game is evolving as expected, but the execution was more volatile than anticipated, triggering a sizable uncertainty shock with negative impact across most regions,” bank analysts said in a research note.
Bank of America has benefited from recent market turmoil, with its stock traders bringing in record revenue during the first quarter. The bank blasted past estimates with record equity revenue of $2.2 billion, a 17% increase, the bank said in a financial results statement. Fixed income, currencies, and commodities trading revenue increased 8% to $3.5 billion. Net income was $7.4 billion for the period, up from $6.7 billion a year ago.
The Semafor View
The boundaryless pools of money that defined finance in the last 20 years are retreating, and capital is becoming a national resource to be protected. Public and private markets seem set to converge: Where they meet — and which firms stake out territory — could determine finance’s winners over the next decade.