Chinese shares maintained relative composure after the US said tariffs on China amounted to 145%, signaling continued focus on Beijing’s stimulus plans.
A key gauge of Hong Kong-listed Chinese stocks swung between a loss 0.9% and a gain of 0.5% on Friday. The onshore CSI 300 Index saw modest declines. Both outperformed a broader Asian market gauge that fell as much as 2.1%.
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The range-bound trading came after the White House clarified Thursday that after including a 20% levy imposed earlier this year, the total tariffs on China stand at 145%, a level far above what many economists said could decimate US-China trade. Now all eyes are on the outcome of a Thursday meeting planned by China’s top leaders to discuss additional economic stimulus to counter the impact of an escalating trade war.
Sentiment in China’s onshore market stayed resilient despite higher US tariffs, according to Morgan Stanley. Trading volumes rose and the national team’s buying continued, strategists including Laura Wang wrote in a note Thursday, referring a group of state-backed funds tasked to support local equities. However, there remains downside risks for the earnings outlook and things could look “visibly worse” from the second quarter onward, they added.
The relative calm also indicates lingering hopes among investors for an eventual deal between the world’s two biggest economies, after President Donald Trump indicated willingness to be “flexible” on exemptions for companies or countries from the tariff regime.
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Trump’s latest tariff increase came after Beijing on late Wednesday said it will impose an 84% levy on all imports from the US. That was after Trump earlier raised the tariffs on Chinese goods to 104%.
Chinese authorities on Tuesday pledged to “fight to the end” in response to Trump’s tariffs, while signaling willingness to talk with the US. They also stepped up efforts to prop up stocks, with some state-backed funds purchasing equities and exchange-traded funds.
Despite the resilience of Chinese equities, the increasingly adversarial bilateral relations have prompted some global investors to cut exposure. Three of the largest US-listed exchange-traded funds tracking Chinese stocks saw a deepened selloff on Wednesday, with traders offloading almost $1 billion worth of shares in a single day.
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A prolonged trade war may also result in Chinese stocks’ underpeformance in Asia, Nomura Holdings Inc. strategist Chetan Seth warned. “We think HK/China equities are still not off of the hook yet – and will likely lag the region as US-China trade tensions are only rising,” Seth wrote in a note Thursday.
