U.S.-listed, China-based stocks experienced a varied session as news of additional Chinese stimulus measures and the looming threat of higher tariffs from the incoming Trump administration caused uncertainty among investors. Last Friday, the Chinese government unveiled a new stimulus package involving six trillion yuan in an attempt to alleviate the debt burdens faced by local governments. However, the market response was lukewarm, with China-based stocks closing lower as investors had expected a more substantial financial support package exceeding 10 trillion yuan.
President-elect Donald Trump's promises to implement tariff hikes on foreign goods, with import fees reaching as high as 60% on Chinese products entering the U.S., further contributed to the market turmoil. Given China's heavy reliance on manufacturing and exports, the proposed tariff increases could potentially lead to a decline in these sectors, impacting the country's economy. Elizabeth Economy, a senior fellow at the Hoover Institution, expressed that while Trump's proposed 60% tariffs could have a significant short-term impact on China's economy, it might present long-term strategic advantages for China's growth.
In response to the tariff threats, China is reportedly exploring a strategy of "unilateral opening" to counter the potential economic repercussions. This strategy involves offering tariff reductions, visa exemptions, and other incentives to U.S. allies in Europe and Asia as a means to mitigate the impact of the proposed tariff hikes. The market reaction to these developments was evident as shares of Alibaba Group Holding BABA and JD.com, Inc. JD saw gains following their successful Singles' Day sales promotions, while Baidu, Inc. BIDU, NIO Inc. NIO, and PDD Holdings, Inc. PDD closed lower amidst the ongoing uncertainty surrounding Chinese stocks.