US-China Trade Tensions Flare Anew on Tariff Talk News and Cancelled Pork Orders

China Policies vs. Fed Status Quo

Investors expect the US-China trade war to impact both economies. However, Beijing’s option to roll out fresh stimulus measures continues to ease fears of a sharp economic slowdown.

On April 28, China’s lawmakers held a press conference on the economy and announced stimulus pledges. According to CN Wire:

Confident in achieving full-year economic growth target of around 5%.
New policies will be introduced in Q2.
Unveil new policies based on changes in the economic situation.
PBoC will cut the Reserve Requirement Ratio (RRR) and interest rates when appropriate.
Continue implementing appropriate loose monetary policy and step up support for the economy.

In contrast, Fed Chair Powell raised concerns about the impact of tariffs on the US economy and prices. Higher prices could delay Fed rate cuts, fueling fears of a US recession. Betting platform Kalshi puts the odds of a 2025 US recession at 57%, well above the 18% chance recorded on Trump’s Inauguration Day.

US-China Markets Divergence Grows

Mainland Chinese equity markets trended lower on Tuesday, April 29, though losses remained modest amid optimism about Beijing’s latest communications. The CSI 300 and Shanghai Composite Index slipped 0.14% and 0.04%, respectively. In contrast, the Nasdaq Composite Index ended a four-day winning streak on April 28, falling 0.10%.

Despite recent volatility, Chinese indices have outperformed US counterparts year-to-date (YTD). The CSI 300 is down 4.03% compared to a 10.07% drop for the Nasdaq Composite Index. Meanwhile, the Hang Seng Index has risen 9.8% year-to-date, highlighting the growing divergence.