China Flexes Economic Muscle, Retreats from U.S. Deals Amid Tensions

China Turns Up the Heat as US Dollar Assets Tumble

On Monday, April 21, China escalated the trade war with the US, announcing a pullback from investments in US private equity firms. The Kobeissi Letter shared the news, stating:

“China is doubling down. China has just announced that they will be pulling back from US private equity investments. Chinese state-backed funds are halting new investments in US PE firms due to government pressure. According to PE executives, funds like China Investment Corporation (CIC) have already begun withdrawing planned commitments.”

Chinese investors are reportedly avoiding US-linked deals altogether.

The Kobeissi Letter commented:

“China is seeking to isolate the US through trade and investment. The US-China trade war just escalated to a new level.”

The development followed Beijing’s stern warning to countries planning to align with the US against China. China’s Commerce Ministry reportedly stated:

“China respects all parties to resolve their economic and trade differences with the United States through consultations on an equal footing. Firmly opposes any party striking a deal at the expense of China. If the situation arises, China will never accept it and will take countermeasures in a resolute and reciprocal manner.”

President Trump previously suggested negotiators should consider their stance on China when coming to discuss tariffs.

Tariffs and the Economic Fallout: Who Will Blink First?

The standoff is beginning to take a toll on economic activity. Jeffrey Snider, host of Eurodollar University Channel, remarked on the impact of tariffs, stating:

“For months, people have wondered what the real impact of tariffs and trade restrictions would be. Now we’re starting to see it — and the early signs are worse than expected.”

Snider cited alarming key economic indicators signaling a major global economic slowdown:

“Here’s what’s happening across the global economy: U.S. imports from China fell 64%. Global container shipments are being canceled in record numbers. South Korean exports just flipped from +5.5% to –5.2% — in one month. Philly Fed manufacturing orders crashed 75 points since January. The Conference Board’s LEI just posted its 23rd drop in 25 months.”

Despite the weaker US data, China’s economic data suggest economic resilience. Beijing’s stimulus measures appear to be gaining traction. Notably, retail sales jumped 5.9% year-on-year in March after increasing 4% in January and February, with unemployment falling from 5.4% to 5.2% in March.

A tighter labor market could potentially boost consumer confidence, fueling domestic consumption, key for the push toward a consumption-led economy. If successful, this transition could mitigate the impact of US tariffs and enhance China’s leverage in trade negotiations.

“In my opinion, Trump will blink first,” said Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, forecasting a US concession.

US-Hong Kong Markets Diverge on Tariffs

Market trends reflect investor sentiment toward tariffs and the potential effects on the US and China’s economies. On April 21, US markets faced heavy selling pressure as US President Trump fueled concerns about Fed independence.

Fed Chair Powell recently warned tariffs may slow growth and drive prices higher, potentially delaying Fed rate cuts. The lack of policy support leaves the US economy vulnerable while Beijing considers fresh stimulus measures to bolster domestic demand and consumption.

Monday’s sell-off left the Nasdaq Composite Index down 17.8% year-to-date (YTD). In contrast, the Hang Seng Index has gained 6.43% YTD, while the CSI 300 is down a relatively modest 3.69%, recovering from its April 7 low.

Brian Tycangco, editor and analyst at Stansberry Research, recently remarked on market trends, stating:

“Hong Kong’s key indices are rallying today even after Wall Street’s big losses overnight. Decoupling takes many forms. This could be the shape of things to come if Beijing is able to sustain growth through stimulus and focus on keeping things stable at home.”

Outlook

Tariff tensions and China’s evolving policy response will remain central to market sentiment. While geopolitical friction could pressure regional markets, further stimulus or yuan depreciation may ease the transition toward a consumption-led model.

Stay with us for in-depth coverage of China’s economic trajectory and global market implications.