Asia in Focus: Why Chinese Stocks Might Perform Despite Tariffs

Picture Source: Newsweek

Donald Trump announced on April 02nd, which he fondly refers to as "Liberation Day", that there will be an introduction of sweeping tariffs over all imports that come into the US. These tariffs came into effect from April 5th and they ranged between 10% all the way to 50%. This decision from the US administration has caused widespread concern worldwide as supply chains and markets are stressed with the sudden introduction of these new tariffs.

The key area of concern is the rising tensions between the US and China as this trade war escalates as both countries continue to impose tariffs on each others imports. As China increased its tariff from 34% to 84% , the Trump administration responded with a 104% tariff rate on Chinese imports.

As trade tensions between the U.S. and China escalate, attention has turned to the Chinese yuan (CNY) as a potential tool in Beijing’s economic arsenal. While some analysts speculate a sharp devaluation could help offset the impact of Trump’s new 104% tariffs, experts warn that such a move would be more harmful than helpful. Devaluation of a currency is the act of purposefully reducing the value of a currency in order to help promote exports. “It’s not a weapon, it’s financial suicide,” said one commentator, highlighting fears of capital flight and long-term damage to China’s financial credibility. Capital flight is a risk of devaluation, where investors pull their money out of China due to a lack of confidence in their markets. However, with over $3 trillion in foreign exchange reserves, the People's Bank of China has both the means and motivation to maintain a stable currency, especially as Beijing looks to strengthen trade ties beyond the U.S.

Instead of turning to currency manipulation, China is focusing on market stability and long-term investor confidence. State-backed institutions—often referred to as the "national team"—are stepping in to support Chinese equities, particularly in AI, automation, and green technologies. While U.S. markets wobble under trade war uncertainty, Chinese indices like the CSI 300 may even outperform by year-end, driven by domestic resilience and investor optimism.

As one analyst put it, “Supply is real. Demand can be created.” In today’s global economy, China’s role as a manufacturing powerhouse ensures that, even amid tariffs, costs will eventually circle back to consumers in the West, and at the end of the day, the US is the worlds largest consumer market.