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Shipping containers are seen at the Yantian International Container Terminals, run by CK Hutchison Holdings Ltd.’s Hutchison Port Holdings Trust, in Shenzhen, China, on April 7, 2025.
This piece is part of the inaugural edition of CNBC’s The China Connection newsletter, which aims to offer insights and analysis on the dynamics shaping the world’s second-largest economy.
This week’s focus is on the diminishing prospects for a trade resolution between the U.S. and China, alongside updates on China’s business communications, several technological advancements, and key macroeconomic data releases to keep an eye on.
The big story
During a press briefing at China’s foreign ministry in Beijing, a notable silence enveloped the room for nearly thirty seconds. This followed my inquiry to spokesperson Lin Jian about the likelihood of a conversation between Chinese President Xi Jinping and U.S. President Donald Trump regarding trade negotiations and whether circumstances had worsened.
Lin responded, highlighting that consistent pressure and threats towards China are unproductive. He also emphasized that China would steadfastly defend its legitimate rights and interests.
When asked about the status of negotiations, Lin redirected the query to specialized government authorities, remarking on Tuesday that current U.S. actions indicated a lack of seriousness regarding talks.
Over the weekend, Beijing made a significant strategic shift, opting to implement comprehensive retaliatory tariffs in response to the U.S.’s recent 34% tariff hike rather than targeting particular American goods.
Experts now express concerns that the dispute may evolve from a trade conflict into broader issues involving investment and geopolitical tensions. “I was surprised by how quickly China enacted the reciprocal tariffs,” noted Liqian Ren, head of quantitative investment at WisdomTree, consequently increasing worries about Taiwan’s situation as well.
She further remarked that the pace of U.S. policy shifts is outstripping expectations.
In less than a week, tariffs on Chinese exports to the U.S. have surged past 100%, causing a global stock market decline amid fears over the economic implications, while China announced measures to support its market.
A recap of the recent developments: Trump announced a 34% tariff on Chinese imports on Wednesday, building on a 20% tariff established earlier. China’s subsequent response included a matching rate on U.S. products. By Monday, Trump hinted at an additional tariff of 50% should China fail to yield.
China’s response has been decisively negative. Following Trump’s announcement, he declared that discussions regarding “requested meetings” with Beijing would be “terminated.” The White House confirmed that a 104% tariff was set to take effect on Wednesday.
Jianwei Xu, senior economist at Natixis for Greater China, commented that China recognizes the futility of restraint if the U.S. aims to suppress its growth, which he views as particularly distressing for the Chinese authorities.
He anticipates that a trade deal is only plausible if both nations begin to suffer economically, pointing out that China has been engaging in negotiations with the U.S. since 2018, far before others now feeling the impact of tariffs.
Hardening on both sides
It remains unclear what a potential U.S.-China agreement might entail, aside from isolated tariff adjustments or restrictions on Chinese exports.
During the Biden administration, China has persistently requested the U.S. to lift technology restrictions but has met with refusals. Trump has hinted at the possibility of ByteDance divesting its U.S. TikTok operations in exchange for lower tariffs; however, TikTok’s representatives stated on Saturday that “substantial disagreements persist,” and Trump extended the sale deadline yet again.
“Currently, there’s little reason for President Xi and President Trump to meet unless there’s background progress,” Ren remarked, indicating her focus on whether U.S. economic pressures might compel Trump to decelerate the decoupling from China.
She noted that the policy approaches from both nations emphasize decisions made at the highest levels, serving as a reminder that the competition between the U.S. and China is likely to continue unabated despite other market narratives, such as advancements related to DeepSeek AI or China’s potential stimulus measures.
A piece published on Monday in the state-run People’s Daily highlighted China’s commitment to strengthening its economy amidst rising trade tensions.
According to Yue Su, principal economist for China at the Economist Intelligence Unit, China’s policy direction has become increasingly coherent and focused on minimizing economic disruptions. She anticipates a shift toward more hardline stances from the U.S. administration.
“China’s response on Friday was clearly a strategic choice, not a reactionary one,” Su asserted. She explained that while Xi typically relies on advisors for trade decisions, he concentrates on overarching issues like anti-corruption and promoting equitable economic growth, particularly to tackle rising income inequality.
This centralized decision-making framework allows both nations to adjust tariffs effectively, although it also introduces a degree of short-term instability in both financial markets and the overall economy.
There are ongoing concerns regarding how China will achieve domestic economic growth and whether innovation can continue to emerge beyond stars like DeepSeek.
Matt Wacher, Chief Investment Officer for Asia-Pacific at Morningstar Investment Management, expressed optimism about potential domestic stimulus measures, suggesting they could surface imminently. He is actively seeking opportunities to invest in Chinese tech and consumer sectors.
“Both sides may ultimately see the value in negotiating if a feasible deal presents itself,” he noted, although he added that there is currently a sense of intransigence.
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Need to know
In the markets
Chinese and Hong Kong stocks showed declines on Wednesday as investors reacted to the impending 104% tariffs on Chinese goods entering the U.S.
The CSI 300 Index from Mainland China saw a decrease of 1.11%, while Hong Kong’s Hang Seng Index—featuring significant Chinese companies—dropped by 3.22% as of 10:00 a.m. local time.
Both indices have been on a downward trend since the beginning of the year, with the CSI 300 down 8.43% and the Hang Seng Index down 2.45%.
The yield on the benchmark 10-year Chinese government bond saw a slight decline to 1.647%.
Furthermore, the offshore Chinese yuan hit an all-time low against the U.S. dollar this past Tuesday.
Coming up
April 9: Revised tariffs of 84% on China will take effect; BYD expected to unveil the new version of its popular Han sedan in the evening local time.
April 10: The new 34% retaliatory tariffs on U.S. goods will come into effect; China’s CPI and PPI figures for March will be released in the morning local time.
April 11: Anticipated release of China’s loan data for March.
April 14: Expected announcement of China’s import and export statistics for March.
April 16: First-quarter GDP data for China, along with reports on March retail sales, industrial production, fixed asset investment, and home price index will be disclosed.
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