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China’s President Xi Jinping reportedly spent over two hours talking about US-China relations, urging the minister to get ready for a full-blown trade war, according to SGH Macro Advisors.

Key Quotes:

“Xi warned all provinces and ministries to be prepared for a full-scale trade war.

China expects it is inevitable the U.S. will impose tariffs on $34 billion worth of Chinese goods on July 6.

China will respond accordingly with tariffs.

In the short term, officials expect the currency will weaken due to trade concerns.

The PBOC also will refrain from increasing holdings of U.S. Treasuries and, in fact, will seek to reduce them “appropriately.”