What are tariffs and why do they affect stock prices?

Tariffs are taxes imposed on imported goods, making them more expensive in the destination country. When tariffs are high, companies face increased costs when selling products internationally, potentially reducing their profits and growth. When tariffs are lowered, as in this recent US-China agreement, companies can trade more freely, potentially boosting their revenue and making their stocks more valuable.

How might the US-China tariff reduction affect my investments?

The tariff reductions (US from 145% to 30%, China from 125% to 10%) could benefit companies with significant cross-border business between these countries. Tech companies, multinational retailers, and firms with manufacturing or large consumer bases in both countries might see reduced costs and increased sales. This could potentially lead to higher earnings and stock prices, though results will vary by company.

What is the significance of the 90-day window for these tariff cuts?

The 90-day period (May 14 to mid-August 2025) is a temporary reduction that gives both countries time to potentially negotiate a more permanent agreement. For investors, this creates a potential opportunity to invest in companies that might benefit immediately from reduced trade barriers, while also watching for signals about whether a longer-term deal might be reached.

What are ETFs like KWEB and FXI in this stock group?

ETFs (Exchange Traded Funds) are investment funds traded on stock exchanges that hold assets like stocks, commodities, or bonds. KWEB is the KraneShares CSI China Internet ETF, which holds shares in Chinese internet companies. FXI is the iShares China Large-Cap ETF, which holds shares in large Chinese companies. These ETFs offer a way to invest in multiple Chinese companies with a single purchase, which can be useful when anticipating positive effects from reduced US-China trade barriers.

What could limit the gains these companies see from tariff reductions?

Several factors could limit the benefits: currency fluctuations between the USD and CNY, supply chain disruptions, macroeconomic conditions such as inflation, or if companies fail to pass on cost savings to consumers. It’s important to monitor these alongside the tariff cuts.

What indicators should investors monitor to evaluate the impact of these tariff cuts?

Investors should monitor trade volume data between the US and China, corporate earnings reports—especially revenue from cross-border operations—macroeconomic indicators like PMI and export figures, and any policy updates or announcements. These metrics can provide insights into how effectively companies are leveraging lower tariffs and whether the economic benefits are materializing.

11 handpicked stocks

US & China Slash Tariffs to Boost Trade

These carefully selected stocks could see growth as the US and China significantly lower trade tariffs. Our analysts have identified companies positioned to benefit from increased trade between the world's two largest economies.

Han Tan | Market Analyst

Updated 2 days ago | Published at मई 3