Growth Dragons Weekly: US-China Tensions Cool: A Turning Point for Trade Terms?
What happened in China this week:
US-China Tensions Cool: A Turning Point for Trade Terms?
Tencent: China’s Most Owned Stock by Fund Managers (Plus 4 Others in the Top 5)
BYD Doubles Profits: Outpaces Tesla by 3X in Q1 2025
Hesai, the World’s Largest Lidar Maker, Expands Production to Support Robotaxi Growth
Robotaxi Maker Pony.ai Now 20–30% Cheaper to Produce Than Alphabet’s Waymo
#1 US-China Tensions Cool: A Turning Point for Trade Terms?
This week, U.S. President Donald Trump confirmed that the 145% tariffs on Chinese imports will be “substantially” reduced, though not entirely removed. Speaking at a White House press conference, Trump struck a more balanced tone, stating that while the U.S.-China relationship could remain cooperative, any trade deal must be on terms that the United States deems fair. "They have to make a deal, or we’ll set the deal," he warned.
Interestingly, memes have been circulating online suggesting that China's muted response to Trump’s tariffs helped defuse his aggressiveness. One of Sun Tzu’s Art of War strategies, 以逸待劳 ("to wait at ease for the weary enemy"), feels particularly fitting here. Instead of attacking, China held its ground and waited for the U.S. to wear itself out. For now, it appears this strategy is working—Trump seems to be running low on levers in the trade war.
Meanwhile, a new move by China’s Semiconductor Industry Association reveals a more tactical response. China will now impose tariffs based on where the chip "tape-out"—the final step in chip design—occurs. Tape-outs typically happen at companies like TSMC and Samsung, creating dilemmas: these companies can’t fully shift investments to the U.S. without risking Chinese tariffs when re-exporting to China. This strategic move mirrors another Chinese proverb, 釜底抽薪 ("removing the firewood from under the cauldron")—addressing the root cause rather than the symptoms.
Notably, Trump’s administration has since eased off by exempting products like computers, smartphones, semiconductor manufacturing equipment, and integrated circuits from “reciprocal tariffs.”
Although formal U.S.-China trade talks have not resumed, signs of backchannel progress are emerging. In a surprise move, China has quietly lifted its 125% retaliatory tariffs on certain U.S.-made semiconductors. Import agencies in Shenzhen confirmed that eight categories of logic chips are now exempt, although memory chips remain subject to duties.
This rollback—unofficially and silently executed—highlights China's commitment to maintaining some semblance of free trade even amid rising tensions.
Despite the de-escalation, there are rumors that U.S. protectionism could persist in two ways:
A broad-based tariff cut of 50%-65% across the board, or
A split-tariff system: higher tariffs (100% or more) on goods deemed sensitive to national security, and lower tariffs (around 35%) on less critical categories.
While we do not speculate on policy moves, it’s increasingly clear that tariffs—at least in some form—are here to stay.
China, for its part, is staying proactive. On April 24, the PBOC announced a 600 billion yuan Medium-Term Lending Facility (MLF) injection, offering 1-year liquidity to support business activity amid macroeconomic uncertainties.
The message from both sides: the battle may be cooling, but the economic chess game is far from over.