Trump's Tariff Time Bomb: Why China's Trade Pain Might Just Be Getting Started

Investors brace for 30% duties to linger, rattling Chinese exports, currency, and stocks through 2025

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May 16, 2025
Summary
  • Markets price in long-term damage as Trump’s tariffs threaten to choke 70% of China’s US-bound exports
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China might have a trade deal on the table, but don't expect much relief anytime soon. According to a Bloomberg survey of fund managers, economists, and banks, US tariffs on Chinese goods—currently at 30%—are likely to stick through late 2025. That level could wipe out as much as 70% of Chinese shipments to the US. While the recent 90-day truce sparked some optimism, most investors aren't betting on meaningful concessions. “We expect that trade negotiations to end up in shallow surface level deals,” said Kelly Chen at DNB Bank, pointing to the 2026 US midterms as a likely hard deadline for any shift in tone.

Markets are already pricing in the pain. The yuan is projected to hold steady at 7.2 per dollar, while Chinese 10-year government bond yields are expected to remain flat around 1.7%. Stocks might edge up—Bloomberg's median forecast has the CSI 300 Index climbing modestly to 4000—but don't expect fireworks. A rush of exports ahead of possible new tariffs could temporarily lift earnings, and pockets of tech-driven growth might help. But beyond that, upside looks capped. “Good news on tariffs is also likely to tone down Chinese policy easing,” said Robert Gilhooly at Aberdeen Investments, hinting that Beijing may have little choice but to let the currency slide if growth slows further.

All eyes are now on the next set of economic data. Industrial output in April is expected to drop to 5.9% growth, down from 7.7% in March, as manufacturers take the hit from weaker US-bound orders. Retail sales may still grow at 6%, but fixed-asset investment is likely stuck in the 4% range. The real risk? Trump's second-term trade playbook could be just as unpredictable as the first. “We're not out of the woods,” warned EFG's Sam Jochim. For investors, the message is clear: buckle up. The tariff turbulence may not be done with us yet.

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I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure