The storm brewing between the U.S. and China just got fiercer. J.P. Morgan’s (JPM) Haibin Zhu made it clear: “Higher-than-expected U.S. tariffs will drag China’s GDP by 0.7%.” This isn’t just a warning shot—it’s a stark prediction of the economic pressures building on China’s already volatile market. The impact is real, and it’s shaking up Chinese stocks. But how will this all play out for investors?
U.S. Tariffs Drag China’s Growth Outlook Down
With new U.S. tariffs hitting Chinese goods, China’s growth forecast has been slashed. As Zhu points out, the rising tariffs could shave off 0.7% from China’s GDP. The ramifications are undeniable. The country’s strong start to 2025, including a 5% GDP growth target, is now threatened. Exports are feeling the heat, and domestic consumption remains sluggish. This pressure is making waves across Chinese stocks, with companies like Alibaba (BABA) and Tencent (TCEHY) showing signs of strain. These giants are now navigating not just trade wars but tightening government policies and reduced global demand.
China Responds Rapidly with Stimulus and Policy Shifts
In response, China is ramping up its fiscal stimulus. With an additional 1 trillion yuan bond issuance, the government is trying to get domestic consumption back on track. In the short term, however, experts like Zhu argue that these measures may not be enough to offset the damage from trade tensions. “While we do not think CNY depreciation will be used as a policy response to tariff risk,” Zhu says, “tolerating a slight yuan weakness is likely.” In fact, this approach is already evident in the market, where the yuan has seen some weakness.
Chinese Stocks Face Uncertainty Amid Trade Wars
Investors now have to brace for more uncertainty in Chinese stocks. As the geopolitical landscape shifts, companies in export-heavy sectors like JD.com (HK:9618) and Baidu (BIDU) could face more challenges. Analysts predict that the ripple effect from U.S. tariffs could drag the broader market down. So, is this a time to buy, sell, or hold? The key is understanding the shifting dynamics.
Using tools like TipRanks’ Stock Comparison tool, you can track how analysts are adjusting their forecasts for Chinese stocks in real-time.
