Trump Imposes an Additional 10% Tariff on Chinese Goods, Shanghai, Shenzhen, and Hong Kong Stocks Plunge in Response

File photo: U.S. President Donald Trump signing an executive order at the Capital One Arena in Washington on January 20, 2025. (Madalina Vasiliu/Dajiyuan)

People News - U.S. President Donald Trump announced that starting next week, an additional 10% tariff will be imposed on Chinese goods exported to the U.S. Following the announcement, China's three major stock markets—Shanghai, Shenzhen, and Hong Kong—plummeted on Friday (February 28), sparking heated discussions among Chinese netizens. Meanwhile, both China's Ministry of Foreign Affairs and Ministry of Commerce issued strong statements, vowing to take "necessary countermeasures." Analysts suggest that U.S.-China trade tensions may continue to escalate, but the Chinese Communist Party (CCP) may lack sufficient leverage for effective retaliation. Even with potential pro-growth policies expected at the upcoming "Two Sessions" meetings, they may struggle to restore market confidence.

U.S. Announces New Tariffs, Chinese Stock Markets Plummet

According to Voice of America, President Trump announced on Thursday (February 27) that, following the 10% tariff increase on Chinese goods in early February, another 10% will be added starting March 4, bringing the total tariff hike to 20% to further pressure the CCP.

In response to the news, China's major stock markets plunged immediately after opening on Friday, with losses ranging from 2% to 4% by the end of the trading session. For example, the Shanghai A-share index closed at 3,320.90 points, dropping 1.98% in a single day. The Shenzhen Component Index closed at 10,611.24 points, down 2.89%. The ChiNext Index fell 3.82%, while the STAR Market dropped 4.22%. Meanwhile, the Hong Kong stock market also tumbled 3.28%, closing at 22,941.32 points—its lowest level in weeks.

Additionally, the pessimistic sentiment among Chinese investors triggered widespread discussions online. Two major trending topics, **#A股# (A-shares) and #Trump Announces Additional 10% Tariff on China#, surged on Weibo’s hot search list.

One news post from Phoenix News regarding Trump's tariff increase garnered over 3,000 comments. However, most comments were censored, leaving only seven visible, which primarily expressed anti-Trump sentiments.

Netizens are Actively Discussing: A Tough Stance Against the U.S. Versus Concerns About the Capital Market

Regarding the decline of the Shanghai A-shares on Friday, Chinese netizens expressed their discontent.

One notable post came from Zhejiang Weibo fund blogger "Xihuan Wan Jijin de Xiao Yu Ge," who shared the latest negative returns from his investments in six artificial intelligence (AI) funds, exclaiming in the comments: "I’m done, give me my money back!"

Another post raised the question, #Trump announces an additional 10% tariff on China# "Will this affect today’s #A-shares#?" This sparked over ten comments, with at least four affirming the concern. For instance, Hunan Weibo user "Y Beidao Erchi P" replied: "Yes, if there’s any disturbance outside, the A-shares will flop."

Beijing netizen "Xiao Tzu Ya Ya Ya Ya Ya Ya" agreed, stating: "This news will lead to further oscillation and adjustment."

On a more optimistic note, Hunan Weibo user "Y Beidao Erchi P" mentioned that he is not worried about Trump’s tariff sanctions and is waiting for a counterattack from the Chinese (CCP) government. He commented: "Follow the team, listen to the command, with passion, unafraid."

In contrast, Hainan moderator "Zhou Si CIO" sarcastically questioned: "Isn’t this meant to create space for a rise during the (Two Sessions) meeting?"

The Chinese Communist Party has confirmed the dates for this year's "Two Sessions," which include the 14th National Committee of the Chinese People's Political Consultative Conference and the National People's Congress, scheduled for March 4 and March 5, respectively. This timing coincides with President Trump's plans to impose a second round of tariffs on China. As a result, some investors anticipate that the decline in the Chinese stock market next week may be hard to reverse. However, if economic stimulus measures aimed at boosting exports are introduced during the Two Sessions, the stock market might find some support for a rebound.

Will the CCP's "Two Sessions" Provide Liquidity to Rescue the Market?

Nonetheless, Lam Cheung-nin, CEO of Hong Kong Smart Eastern Securities Limited, expresses a pessimistic outlook. He remarked that the Two Sessions have traditionally served as a rubber stamp, and if the authorities wish to implement economic stimulus plans, they do not need to wait for the Two Sessions to do so. Furthermore, the various plans rolled out since September last year appear to have had limited actual impact on stimulating the economy.

He noted that the ongoing escalation of U.S. tariffs on China and the deep-seated hostility towards the CCP could exacerbate anti-American sentiment among the Chinese populace. This is particularly concerning as Trump also intends to raise taxes globally, potentially affecting countries like Vietnam and Bangladesh. This situation poses challenges for Chinese export manufacturers who have already relocated their production lines to third countries to evade U.S. tariffs.

Lam Cheung-nin told Voice of America: "Trump had already imposed a 10% tariff on Chinese imports in 2018, and in February this year, he added another 10%. If he imposes yet another 10% in March, that would total a 30% tariff, which would be a significant blow to Chinese exports. This means that you (Chinese exporters) will incur much higher costs, which is detrimental to the Chinese economy."

As a result of the current negative news, Lin Changnian predicts that the Chinese stock market may undergo a period of adjustment. For instance, the Hong Kong stock market could drop to 21,000 points before investors are willing to buy in at lower prices.

External estimates indicate that prior to the U.S. imposing a 10% tariff in early February, the average tariff on Chinese goods exported to the U.S. was approximately 19%. If the tariff is increased to 20% starting March 4, this would nearly double the average tariff to 39%. Notably, semiconductor products, which are regarded as strategic materials, have already been subjected to a 50% tariff on Chinese semiconductor exports to the U.S. since January this year under President Joe Biden. Consequently, when combined with Trump's previous two 10% tariff increases, the tariff on China's mid-to-low-end chips exported to the U.S. could soar to 70% after March.

Wu Jialong, a macroeconomist and senior political and economic commentator based in Taipei, candidly stated that during Trump's first term, it became evident that the Chinese Communist Party had no intention of addressing the trade imbalance, which led to the imposition of high tariffs. In his second term, it is unlikely that Trump's trade policy towards China will relax; rather, it may intensify until the Chinese Communist Party 'feels the pain.'

Wu Jialong: The U.S.-China Tariff War Will Continue Until the CCP Feels the Pain

Wu Jialong told Voice of America: "China has not taken the issue of trade imbalance seriously in the past, so the U.S. has no choice but to impose tariffs. Trump will keep increasing tariffs until the CCP feels the pain. In addition, there will be technological restrictions and other regulatory measures, including export controls and investment restrictions on China. The CCP must feel the pain before it takes the issue seriously."

Wu pointed out that China's past economic strategy, which relied on mass production leading to overcapacity, price-cutting competition, and dumping exports, is no longer sustainable. If China encourages private sector investment, creates jobs, and expands domestic demand, it may be able to grow its import market and increase purchases from the U.S. This, in turn, could help ease the trade imbalance between the two countries.

According to official statistics, the U.S.-China trade deficit reached $295.4 billion in 2024, significantly lower than its peak of $418.2 billion in 2018, when Trump first imposed tariffs on approximately $370 billion worth of Chinese exports to the U.S.

Regarding Trump’s upcoming second round of tariff hikes on China in March, Chinese Foreign Ministry spokesperson Lin Jian expressed "strong dissatisfaction" at a regular press briefing on Friday.

China’s Ministry of Commerce also issued a written statement echoing the Foreign Ministry’s stance with similar rhetoric.

When Trump implemented the first round of 10% tariffs on Chinese goods on February 4, Beijing responded with countermeasures, including: Up to 15% additional tariffs on certain U.S. energy and agricultural equipment imports; Launching antitrust investigations against several U.S. companies, including Google.