By Dilin Wu, Research Strategist at Pepperstone
The latest tariff announcements have once again heightened uncertainty in U.S.-China relations, putting short-term pressure on export-oriented sectors, such as technology, semiconductors, electronics manufacturing, and machinery. However, China’s diversified export base and swift policy responses mean that the broader economic and market impact is likely to be contained. Traders may view this as a short-term shock rather than a structural threat.
China’s dependence on the U.S. market is steadily declining, which further limits the potential impact. In the first eight months of this year, exports to the U.S. fell 15.5% YoY, with agricultural products such as soybeans piling up. At the same time, Chinese companies have accelerated diversification, posting export growth to the EU, ASEAN, Japan, Australia, and other markets. ASEAN alone saw more than 14% growth. In other words, export risk is spreading globally, and the U.S. is no longer the sole pillar.
Timing also plays an important role. With the U.S. government currently in a partial shutdown and administrative efficiency low, implementing additional tariffs—which requires systemic adjustments—may be delayed or disrupted. By contrast, China can implement countermeasures swiftly. In the short term, markets should pay closer attention to policy execution and negotiation dynamics rather than panicking over headline tariff numbers.
Overall, while export-oriented sectors may face short-term pressure and heightened price volatility, Chinese exporters remain resilient over the medium to long term. Diversified markets and structured countermeasures provide effective buffers. Short-term volatility may present trading opportunities, while medium-term risks appear manageable. China’s export structure and policy flexibility are likely to support the market in navigating this shock.
The key factor in this round of friction lies in its duration and the responses from both sides. Early this morning, Trump signaled a softer stance on the issue of Truth. If the tariffs are largely a TACO strategy, the market could experience a short-term shock followed by a buying opportunity. But if the measures are fully implemented, costs for Chinese exporters would rise and profits would come under pressure, potentially triggering a new wave of volatility.