China is considering waiving tariffs on certain US goods, boosting markets and signaling a potential de-escalation in the trade war with Washington.
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy. Hope is swirling this morning that China might relax some of the tariffs it has imposed on US goods as part of Donald Trump‘s trade wars.
China has experienced rapid economic growth since adopting market-oriented reforms in the late 1970s.
The country's GDP has grown from $150 billion to over $14 trillion, making it the world's second-largest economy.
China is also a major manufacturing hub, accounting for over 30% of global production.
With its growing economic influence, China has become an increasingly important player on the global stage, with significant implications for international trade, politics, and culture.
With the economic costs of the tit-for-tat trade war hurting Chinese companies, Beijing appears to be seeking to mitigate the economic fallout from the conflict. According to Bloomberg, this means China’s government is considering suspending its 125% tariff on some US imports – a sign that policymakers are worried about the damage caused by its trade war with Washington.
The proposed tariff exemptions include medical equipment and certain industrial chemicals like ethane. Officials are also discussing waiving the tariff for plane leases, which would help alleviate financial burdens on Chinese carriers that lease aircraft from third-party companies.
Trade War Easing Could Have Far-Reaching Consequences
Trade wars occur when countries impose tariffs or other trade restrictions on each other, leading to a decline in international trade.
This can result in higher prices for consumers, reduced economic growth, and increased unemployment.
According to the World Trade Organization (WTO), trade wars have cost the global economy over $700 billion since 2018.
The effects of trade wars are often felt most strongly by small businesses and low-income households, who may struggle to absorb the costs of 'higher prices' .
Signs of de-escalation in the trade war will cheer investors, after a bruising few weeks since Trump announced his tariffs on trading partners. The potential easing could also reassure politicians and central bankers around the world, who fear the consequences of a slowdown in world trade.
The Bank of England‘s governor, Andrew Bailey, warned on Thursday that the UK economy faces a ‘growth shock’ as a result of Trump’s trade policies. However, with China considering exempting some US imports from its tariffs, investors are taking heart.
Global Markets React to Easing of Trade Tensions
Stock markets across the Asia-Pacific region are higher today, following reports that China is considering suspending its 125% tariff on some US imports. Hong Kong‘s Hang Seng index has rallied by 1%, while South Korea‘s KOSPI has jumped by 1.8%. Japan‘s Nikkei index has also increased by 1.8%.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, reports that signs of de-escalation in trade tensions are lifting optimism. Yesterday’s comments from Federal Reserve members and the easing of trade tensions between the US and China allowed a further recovery in global equities.
Retail Sales Show Resilience
In other news, retail sales volumes rose by 0.4% in March, according to the Office for National Statistics. This follows a rise of 0.7% in February, and marks the third consecutive month of growth. The growth is attributed to good weather, which boosted sales across various sectors.
Apple Aims to Source All US iPhones from India
The US-China trade conflict is forcing companies to rethink their supply chains. Apple, for example, is reportedly pivoting away from China, with plans to shift the assembly of all US-sold iPhones to India by as soon as the end of 2026. This move would double iPhone output in India and help alleviate financial burdens on Chinese suppliers.
Market Outlook
The easing of trade tensions between China and the US has lifted optimism among investors. With China considering exempting some US imports from its tariffs, investors are taking heart. However, the impact of this move on the global economy is still uncertain, and market conditions will continue to be closely watched.
