US-China Tariff Tensions Reignite as Trump Walks Back Soften Stance

US Administration U-Turns on China Tariffs

President Trump unexpectedly U-turned on his tariff stance against China on Tuesday, April 22, amid concerns over a global economic slowdown. According to CN Wire, Trump was considering halving China’s tariffs to entice Beijing back to the negotiating table.

Trump’s pivot coincided with the International Monetary Fund’s (IMF) updated global growth projections. On April 22, the IMF slashed its US 2025 growth forecast by 0.9 percentage points to 1.8%, down from 2.8% growth in 2024, citing tariffs and policy uncertainty.

The IMF also lowered China’s 2025 growth forecast, albeit modestly, by 0.6 percentage points to 4%, cushioned by Beijing’s stimulus support measures.

IMF Chief Economist Pierre-Olivier Gourinchas stated that growth prospects could improve rapidly if trade tensions eased and new agreements were reached. He emphasized the importance of addressing internal imbalances and increasing domestic demand in China to support global output.

Retail Sector Warnings and Recession Fears Prompt Policy Shift

The IMF also raised its estimate of a 2025 US recession to 40%, up from 27% in October. However, it noted that Beijing’s fiscal stimulus was helping counter the negative impact of trade tensions on China’s economy.

Earlier this week, Trump met with the CEOs from Home Depot, Lowe’s, Target, and Walmart. The CEOs warned Trump of empty shelves looming in the months ahead. With private consumption accounting for over 60% of US GDP, empty shelves could hit the US economy hard. Supply-demand imbalances may also push inflation above the IMF’s latest 3% forecast.

In political circles, Trump’s softened stance is also seen as an effort to shield US farmers—a core segment of his base. Fox Business Senior Correspondent Charles Gasparino noted that the tariffs were hurting agricultural exports to China, undermining Trump’s support in rural America. However, sources indicated that a deal remains distant and that Chinese willingness to compromise is still uncertain.

Economists argue that China’s entrenched role in global supply chains potentially limits Washington’s leverage. Natixis Asia Pacific Chief Economist Alicia Garcia commented:

“The critical dependence China has developed around the world, especially in Asia, means that lots [of trading partners] cannot do without China. From critical minerals to silicon chips, Chinese exports are almost irreplaceable.”

As if to illustrate the point, news broke on April 23 that Alibaba International topped the US app store shopping charts.

Tariff Policy in Flux as Markets React

Following Tuesday’s U-turn on tariffs, Peter Berezin, Chief Global Strategist and Director of Research at BCA Research, formerly with the IMF, remarked:

“I know this is a crazy thought, but it’s possible that Trump might change his mind on the tariffs again.”

Since Tuesday’s initial U-turn, Trump appeared to backpedal just a day later. On Wednesday, April 23, he clarified that tariffs would remain in place without a trade deal. The Kobeissi Letter summarized the developments as a signal for extended market volatility.

On Wednesday, April 23, Trump confirmed:

“I haven’t brought it down, I said it’s a high tariff, but I haven’t brought it down.”

US-China Market Divergence Grows

Mainland China’s equity markets opened higher on Thursday, April 24, buoyed by hopes of fresh stimulus. The CSI 300 and Shanghai Composite Index inched up 0.04% and 0.03%, respectively. In contrast, the Nasdaq 100 Futures dropped 51 points, reflecting uncertainty surrounding US trade policies.

Despite US market rallies in recent sessions, Chinese indices have outperformed year-to-date. The Nasdaq Composite Index is down 13.48% year-to-date, while the CSI 300 has fallen 1.69%, highlighting Beijing’s policy impact.

Outlook

Trump’s wavering tariff stance will remain a key driver of market sentiment. While progress in trade talks could soothe investor nerves, the absence of a clear deal may sustain volatility. Nevertheless, Chinese and Hong Kong equities appear better insulated, thanks to ongoing fiscal support from Beijing. The Hang Seng Index has gained 8.61% year-to-date.

Follow our ongoing coverage of China’s economic outlook, tariff developments, and global market reactions.