(Bloomberg) — Chinese stocks posted modest losses as Beijing’s measured response to US tariffs eased immediate concern about a full-blown trade war, with investors looking to a key political gathering to sustain a recent rally.
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A gauge of Chinese shares listed in Hong Kong ended Tuesday down 0.6%, having fallen as much as 2.5% early in the day. The onshore benchmark CSI 300 Index slipped less than 0.1%.
Market reaction was relatively muted as Beijing unleashed a flurry of retaliatory measures in response to higher US levies, which took effect mid-day in Asia. China imposed tariffs as high as 15% on US exports, but kept the focus on agricultural products. Policy hopes ahead of China’s National People’s Congress meeting, which starts Wednesday, may have also helped avert a bigger selloff.
“China’s hit-back isn’t exactly aggressive — a 15% tariff on US agricultural goods, but nothing broad-based on tech or autos, suggests to me they’re leaving room for negotiation,” said Billy Leung, an investment strategist at Global X ETFs. “That’s probably why Chinese stocks are rebounding instead of selling off harder.”
Read: Trump’s China Tariffs Seen Dulling Positives of NPC: Analysts
The outcome of the NPC will have greater significance in the wake of heightened Sino-American tensions. Policymakers are expected to push China’s official budget deficit target to its highest level in over three decades at the meeting, pumping trillions of yuan into a system battling deflation, a property crash and the US trade clash.
Concerns over US tariffs have taken a backseat among Chinese stock investors so far this year, as optimism over DeepSeek drove a world-beating rally in tech shares. The Hang Seng Tech Index — whose members include Chinese heavyweights Alibaba Group Holding Ltd. and Tencent Holdings Ltd. — has advanced about 24% this year.
“Tariff risk is less of a focus for Chinese stock investors compared to domestic policy and AI advancement,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “The recent rally in Chinese stocks is largely within the tech sector and is driven by the realization of AI value rather than macro factors.”
The market’s resilience, however, could quickly falter should Trump hit back again with even stronger restrictions. A selloff seen last Friday, when the US president threatened the levy that came into effect on Tuesday, underscores how easily sentiment can be hit.
