21 April 2025
Trade tensions continue to climb. In the recent round of escalations, President Trump sharply raised tariffs on Chinese goods to 145% (effective as of 9 April), prompting countermeasures from China which raised reciprocal tariffs on US goods to 125% (effective as of 12 April).
But this may be the upper limit for tariff actions. Alongside China’s tariff announcement, it stated that it will not respond to further US tariff hikes (MOFCOM, 11 April). Meanwhile, the recent US electronics exemptions mean Chinese goods in these categories (RMB102bn or c23% of US imports from China) only face 20% tariffs, as opposed to 145%, although the exemption may only be temporary.
To mitigate tariff impacts, China is strengthening diplomatic engagement globally. For example, it recently signed 45 bilateral cooperation agreements with Vietnam across areas including Artificial Intelligence, agriculture and sport (Xinhua, 14 April), while China’s Commerce Minister has held discussions with the EU, ASEAN, G20, BRICS, and Saudi Arabia on countering US tariffs.
Policymakers may need to provide more domestic support for economic growth to counter tariffs, including more fiscal and monetary easing, and expanded policies for consumption. Premier Li Qiang conducted a field survey in Beijing on 15 April and stressed the importance of stimulating inner circulation and boosting consumption to counter external headwinds (Stcn, 15 April).
Expanded consumer goods trade-ins: These initiatives have seen robust participation since their launch last year, with over 100mn home appliance trade-ins completed (People’s Daily, 12 April). Funding has doubled this year (to RMB300bn) and more product categories are expected to be added. Guangzhou has said that residents from Hong Kong, Macau, Taiwan, and foreigners with permanent residence are eligible for trade-in subsidies (Securities Times, 12 April).
Boosting service consumption: Last week, China unveiled plans to support consumption in health and sports (Xinhua, 11 April). Local governments, including Hohhot, have introduced childcare subsidy policies, with more expected to join. Two dairy producers have also launched subsidy programmes worth RMB2.8bn in April (Xinhua, 11 April). And a "Shop in China" campaign will promote consumption nationwide focusing on goods, dining, and cultural tourism (Xinhua, 14 April).
Other measures in the pipeline: Policies to raise household incomes, expand public services based on residency, and stabilise property – a key drag on household wealth and consumer confidence – are accelerating. Property saw renewed pressure in the first 14 days of April, as new home sales in 30 major cities fell 11% y-o-y, underscoring the need for intensified policy support, including from local government funds and potential direct central government funding.
Source: Wind, HSBC
Source: Wind, HSBC
Exporters selling locally: The Ministry of Commerce has pledged to help exporters boost domestic sales, by helping with market access, distribution channels, financial services and logistics (Xinhua, 11 April). The ministry has convened discussions with industry associations, retailers, and logistics firms, with many announcing that they would help exporters go domestic through increasing purchases. Among them, JD.com pledged RMB200bn for the cause (Cailianshe, 11 April).
Source: LSEG Eikon
* Past performance is not an indication of future returns
Source: LSEG Eikon. As of 15 April 2025, market close
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