This relaxation is a win for China. It is estimated that the exemptions cover somewhere between 15% and 25% of China's exports to the US.
To date, and despite the many remaining tariff uncertainties, China's equity market continues to display surprising resilience. The CSI 300 Index is down just -0.7% year-to-date.
Analysts are detecting some weariness to the US's on-again, off-again tariffs among investors. Warnings by the Trump team in mid-April that new semiconductor and smartphone tariffs are due to be announced "in a month or two" seem not to have provoked much of a reaction.
In addition, a group of state-backed "National Team" investors, including Central Huijin Investment and China Securities Finance Corp, have been tasked to stabilise the Chinese market during periods of market turbulence. This may have further helped to limit the market's downside.
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Tariff-induced opportunities
Looking ahead, China cannot escape unscathed from its trade conflict with the US. However, there are some silver linings emerging:
1. Intense focus on the domestic sector
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As a result of the tariffs imposed by Trump during his first term in office, China has learnt to grow its economy while reducing its exports to the US.
In 2024, the US accounted for less than 15 % of China's exports and only two % of Morgan Stanley Capital International (MSCI) China companies' revenue exposure. This is in stark contrast to other Asian countries. For example, in Taiwan, more than a third of its companies' revenues are derived from the US.
In fact, out of the total revenues generated by MSCI China companies, only 13 % are from overseas. The majority of revenues come from sales to the local population and amid current trade restrictions, such trends are expected to deepen considerably.
While China's economy has been slowly turning towards domestic consumption as a primary growth driver, Trump's policies appear to be greatly accelerating this structural shift.
2. Reshaping of trading relationships
It has been suggested that no matter what tariff policy is eventually imposed by the US, the genie is now out of the bottle. Going forward, countries and companies will be keen to end any over-reliance on the US within their manufacturing supply chains.
For example, back in October 2024, the European Union (EU) imposed additional tariffs ranging from 17 to 35 % on China-made electric vehicles. Designed to last five years, the EU has had a quick rethink in response to Trump tariffs, and is seeking a minimum price agreement with China instead. Analysts believe that this is a big step towards greater EU-China collaboration and greater Chinese manufacturing investment in the EU.
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It is not just economics but also geopolitics that could drive countries into China's arms. Asia and Latin America are key geopolitical battlegrounds for the US and China. With Trump having ceased much of its foreign aid and set to withdraw from multilateral organisations, China is expected to increasingly fill the vacuum, especially given its long history of Belt and Road initiatives.
3. A more vibrant capital market
While not a new threat, the current trade disputes between China and the US could solidify US plans to delist Chinese companies from US exchanges. As a result, American Depository Receipts (ADRs) of Chinese firms have seen significant sell-downs in 2025.
However, many analysts do not see the potential delistings as a negative development. Most of these firms have already relisted or dual-listed in Hong Kong, Shanghai or Shenzhen, or have plans to do so.
Going back to the 1990s, many innovative Chinese start-ups preferred to list in the US as a means of quicker global recognition and growth. Local Chinese or Hong Kong listing rules were also more prohibitive. This has changed significantly in the last decade, both within the mainboards and newly created Nasdaq-lookalikes such as Shanghai's Star Board and Shenzhen's ChiNext Board.
China has long sought to open its capital markets to foreign investors, and the migration of Chinese companies back to the Hong Kong or China exchanges could help boost China's attractiveness. There are currently more than 100 Chinese companies that are not dual-listed. These ADRs have a total market capitalisation of US$130 billion ($171 billion), including a few big names like Pinduoduo and Futu. Their potential US delistings and China relistings are yet another unintended consequence of the current US-China trade war.
What does this mean for investors?
In the short term, China faces challenges not just from the direct imposition of US tariffs, but also from the indirect impact on global trading volumes, growth and company earnings. As a result, we have shifted from an overweight to a neutral position on Chinese equities within our global portfolios.
Investment Perspective
That said, we remain positive on selective China technology and consumer-related stocks in the medium to long term. We believe that these sectors will benefit from China's structural growth trends and remain profitable, even in the midst of a US-China trade conflict.
The market is eagerly awaiting the Chinese government's announcement of a stimulus package to help mitigate the effects of the Trump tariffs. While this will be a positive catalyst for the entire market, the package is expected to benefit the domestic consumption sector, particularly. As such, we favour China A-shares rather than H-shares, supported by the National Team's statement that it is "firmly optimistic about the development prospects of China's capital market and fully recognises the current investment value of A-shares".
Chong Jiun Yeh is the group chief investment officer at UOB Asset Management
