Why Are US-Listed Chinese Stocks Falling On Wednesday?

U.S.-listed Chinese companies Alibaba Group Holding (NYSE:BABA), PDD Holdings Inc (NASDAQ:PDD), Baidu, Inc (NASDAQ:BIDU), NIO Inc (NYSE:NIO), Li Auto Inc (NASDAQ:LI), and XPeng Inc (NYSE:XPEV) are trading lower Wednesday.

President Donald Trump’s administration revealed on Tuesday a fact sheet citing tariffs on certain Chinese imports as high as 245%, citing its retaliatory actions.

China’s gross domestic product grew 5.4% in the first quarter, topping the analyst estimate of 5.2% backed by consumer subsidies and aggressive export shipments to beat tariffs, Bloomberg reports.

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Both production and consumption indicated unexpected momentum in March before the tariffs kicked in. However, an intensifying trade war dims its outlook and fuels calls for stimulus.

Michelle Lam of Societe Generale SA highlighted the urgency of stimulus to Bloomberg, citing high-frequency data showing tariff impact on U.S.-bound shipments. National Bureau of Statistics data indicated front-loaded shipments partly supported the economy before tariffs surged in April.

Without more stimulus, China could struggle to meet its growth target of ~5% in 2025. Exports will likely contract after contributing to a third of growth in 2024, while business and consumer sentiment will likely suffer the trade war consequences.

Economists at international banks, including UBS Group and Goldman Sachs, slashed their forecasts for China’s 2025 growth to ~4% or lower. The tariffs will prompt companies to raise the prices of their products to maintain their margins.

However, Chinese companies bank on their lower-priced offerings, and therefore, raising the prices could affect their demand.

The tariff war began with Trump imposing a 20% tariff on China after he took office, a 34% levy on April 2, and an additional 50% duty in response to China’s retaliatory threats, heightening the initial tariffs to 104%.

China retaliated by increasing its tariffs by 84%. Trump later hiked the 104% to 125%. Last Friday, China, too, raised its levies on U.S. imports to 125%, while U.S. tariffs on China stood at 145%.

Bush Chu of Aberdeen Investments and TD Cowen of Jaret Seiberg highlighted concerns about potential delisting as retaliatory actions from the U.S. led to a selloff of heavily foreign-owned Chinese tech stocks.

Chinese e-commerce firms have been the worst impacted by the U.S. raising tariffs on small parcels.

China ETFs traded in the U.S. iShares China Large-Cap ETF (NYSE:FXI) and KraneShares Trust KraneShares CSI China Internet ETF (NYSE:KWEB) are trading lower on Wednesday.

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