The prospect of a revived trade war between Beijing and Washington is threatening to undermine this year’s blistering rally in Chinese stocks.
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Global equities took a hit on Friday after US President Donald Trump warned he would impose a “massive” increase of tariffs on Chinese goods. He later said he would put an additional 100 per cent tariff on China from November 1, as well as place export controls on critical software. His reaction came after Beijing unveiled curbs on the export of rare earths earlier in the week.
A gauge of Chinese stocks listed in the US plunged more than 6 per cent in its biggest loss since trade tensions escalated in April. American equities also tumbled, with Nvidia, which is caught in the middle of the two nations’ export controls negotiations, sliding nearly 5 per cent. Emerging market currencies weakened.
“China’s markets will likely open under pressure on Monday,” said Haris Khurshid, chief investment officer at Chicago-based Karobaar Capital. “The tariff headline and new tech restrictions will spook sentiment right out of the gate.”
Hong Kong’s Hang Seng Index has climbed 31 per cent in 2025 as Chinese equities benefited from the trade truce with the US in addition to optimism over the country’s growing heft in artificial intelligence. Alibaba Group Holding has surged more than 100 per cent, with Tencent Holdings up almost 60 per cent. The rally comes after the Hang Seng fell for four straight years through 2023.
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The uncertainty could limit the impact on Chinese equities, according to Hao Zhou, chief economist at Guotai Junan Hong Kong.