Chinese stocks dropped after US President Donald Trump signed an order to increase tariffs on the country, testing investors’ nerves before a crucial political meeting in Beijing this week.
A gauge of Chinese shares listed in Hong Kong declined as much as 2.5%, while the onshore benchmark CSI 300 Index fell as much as 0.8%. BYD was among the biggest decliners, after a bumper share sale, but selling pressure hit almost every sector.
“There was definitely some expectation that Trump would continue to bluff, so actual implementation is news,” said Kieran Calder, head of Asia equity research at Union Bancaire Privee in Singapore. “The situation could easily escalate as China retaliates. It is negative for China exporters and general sentiment.”
The tariff announcement came ahead of the China’s National People’s Congress meeting, which starts Wednesday. Investors are on the lookout for more stimulus that could give a boost to a recent stock market rally.
But the hope of stimulus has collided against the reality of US tariffs — and for now, at least, investors are in retreat.
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Policymakers are expected to push China’s official budget deficit target to its highest level in over three decades at the NPC meeting, pumping trillions of yuan into a system battling deflation, a property crash and the US trade clash.
Trump signed an order to raise the tariff on China to 20% from 10%, according to a post on X from the White House’s Rapid Response account. Investors are now bracing for a Chinese response: The nation said it would adopt countermeasures to defend itself against US tariffs, raising the risk of a period of tit-for-tat trade moves.
The US president also said he was going ahead with tariffs against Canada and Mexico.
Chart: Bloomberg
