Chinese Stocks Jump After Agreement With US On Tariff Reductions

Chinese stocks listed in Hong Kong surged after the US and China said they will temporarily lower tariffs on each other's products, a move that gives the world's two largest economies more time to resolve their differences.

The Hang Seng China Enterprises Index and Hong Kong's benchmark Hang Seng Index both extended its gains to 3.6% after the two countries released a joint statement announcing the move. The onshore CSI 300 Index ended Monday 1.2% higher, recouping the losses it incurred after the US imposed steep tariffs on its major trading partners on April 2.

The combined 145% US levies on most Chinese imports will be reduced to 30% including the rate tied to fentanyl by May 14, while the 125% Chinese duties on US goods will drop to 10%, according to the statement and officials in a briefing Monday.

“The tariff rate reductions are larger than expected, considering Trump floated 80% at the end of last week, and should be positive for global market sentiment,” said Marvin Chen, a strategist at Bloomberg Intelligence. “The 90-day pause should bring relief for China's export sector as the US and China work on longer structural changes.”

Chinese stocks had already gained earlier in the day after the two countries reported “substantial progress” in weekend talks, the clearest sign yet that further escalations of the trade war between the two countries can be avoided.

“Since the ‘worst' is over, any further easing of trade tensions will provide optimism to fuel Chinese equities,” said Francis Tan, Asia chief strategist at Indosuez Wealth Management.

The broader outlook for China's stock market is positive, with domestic policies supporting real consumption and sentiment likely to be the main catalyst for further moves higher this year and beyond, said Tan.

The advance in Chinese equities was part of a broader move higher across Asia, as traders breathed a sigh of relief following months of tariff-related turmoil. US equity futures also rallied during Asian trading hours, with contracts on the S&P 500 up around 2.7%.

Chinese stocks were hit hard by Trump's “Liberation Day” tariff announcements, which led to a series of responses and counter-responses by the two countries. The HSCEI plunged 14% on April 7, as Hong Kong stocks had their worst day since 1997.