There had been enthusiasm about attempts to get talks between China and the United States under way again.

However, according to a Wall Street Journal report that cites officials with knowledge of the planned discussions, President Donald Trump has told aides to proceed with additional tariffs on Chinese products while the Chinese government is considering declining an offer of talks.

So far it least, one could say that Trump appears determined to put in place more tariffs or tax increases on U.S. consumers who buy goods partially made in China.

None of this is official. Asian markets have reacted negatively.

For investors, it could be interesting to take note of the fact that Chinese equities continue their downward slide with the Shanghai Composite Index closing at its lowest level since 2014, erasing hereby the last traces of its recovery from a boom that turned into a $5 trillion bust. The Shanghai Composite Index dropped 1.1 percent to 2,651.79, which is below its January 2016 bottom.

The malaise in Chinese equities contrasts with gains for global stocks. The MSCI All-Country World Index is up 21 percent since Nov. 27, 2014, while the S&P 500 Index has handed investors a 40 percent rally.

I personally would remain on the sidelines for Chinese stocks and overall Asian equities until we’ll get a clearer picture about the question whether the actual high trade tensions between the U.S. and China turn into a full-blown trade war.

Investors shouldn't forget that all what weakens China, weakens Europe, which certainly weakens Germany.

For investors, there will be deals to be made in the Chinese equity market as well as in the broader Asian markets as soon as there is clarity in the trade dispute between the U.S. and China.

For economists, it would be something of a relief to know what the tariffs are going to be. It would also help in determining how much damage to growth would be. At the moment, there are too many possible options to generate convincing forecasts.

Also, businesses and for example shipping companies as well as customs brokers are trying to understand which way the tariffs will go.

U.S. Inflation and Tariffs

The details of U.S. inflation data are showing that the tariff increases so far have been passed on. Consumer prices for washing machines are reflecting the increased cost of import tariffs entirely, although it did take some months for the full force to come through.

Users of metals are passing on higher prices as well almost universally.

Of course, the tariffs to date have been relatively limited in their scope. More noise than substance.

The proposed tariffs involving China, if applied, would be more substantial.

Is the Bottom in for Emerging Markets?

It’s certainly not an overstatement to say that the rout in emerging markets (EM) may be nearing a bottom, but we aren’t there yet. It could still take some more time before we are there.

There are still several countries that will suffer further for various internal reasons like politics, deficits and other factors.

There is no doubt that a firmer dollar that has gained about 5 percent since mid-April and higher/firmer U.S. Treasury yields have caused the continued weakness in emerging markets and EM currencies.

JPMorgan Asset Management and Man Group Plc are among those expecting further dollar strength. Others such as DoubleLine Capital’s Jeffrey Gundlach see a dollar decline by year’s end.

It could go either way. The dollar might appreciate more if investors continue to seek haven assets amid worsening U.S. and China trade relations, though it may be weaker if the U.S. economy starts to overheat and the chance of a slowdown starts to weigh on investors’ minds.

Besides all that, Turkey’s President Erdogan said that the leading opposition party’s stake in the bank “Turkiye Is Bankasi AS”, which is Turkey’s largest listed lender by assets, should be transferred to the Treasury, which of course has spooked investors once again. So far, the Turkish lira has fallen another 3 percent.

It's a fact that emerging markets will not hit bottom as long the dollar doesn’t show signs of weakening somewhat. Investors should not forget that the trade-weighted dollar still quotes below where it was on January 4, 2017 at 128.3967 and on September 5 it quoted 126.4258.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.