Chinese stocks exposed to the threat of Donald Trump’s tariffs, such as Alibaba (BABA) and Temu (PDD), are enjoying a reprieve as the new president held back from imposing tough new sanctions on day one of his second term.
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But hopes for a lasting resolution may hinge on a range of negotiating factors, including whether the U.S. and China can come to a deal over TikTok.
Dangling the threat of 100% tariffs over China if it does not do a deal, Trump said the U.S. was entitled to half of TikTok. He issued an executive order to keep the platform online for 75 days, postponing a deadline for ByteDance to sell its stake in the app or face being banned in the U.S.
“TikTok is worthless, worthless if I don’t approve it, it has to close. I learned that from the people that own it. If I don’t do the deal, it’s worthless, worth nothing. If I do the deal, it’s worth maybe a trillion dollars, a trillion,” Trump said.
China Stocks Optimism Tempered
There was some relief that China had not been hit with tariffs on day one. While Trump threatened to impose 25% levies on Mexico and Canada by February 1st, there was no detail on how he would handle Beijing and the comments about TikTok indicate the president may use the threat of tariffs to get what he wants.
This element of relief saw shares in Chinese stocks BABA and PDD open higher in early trade on Wall Street on Tuesday. However, some early optimism among some other names such as JD.com (JD) and Baidu (BIDU) fizzled out upon the open as investors digested the deluge of Trump’s early actions.
Indeed, any relief for Chinese stocks may prove temporary, according to Ronald Temple, chief market strategist for Lazard’s Financial Advisory and Asset Management businesses.
“I would be reluctant to add any exposure to China now because the markets have not priced the risk of tariffs being imposed on China appropriately,” he told Bloomberg in an interview.
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