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Mainland China and Hong Kong markets were closed overnight to celebrate the Ching Ming Festival (“Tomb Sweeping Day”). This is the day when Chinese families visit the tombs of their ancestors to clean the gravesites and make offerings. It is important to note that with China’s markets closed overnight, the natural buyers were absent from the markets, which is leading to a steep selloff in US-listed shares. US-listed stocks and ETFs are being priced lower due to the market closure in Hong Kong. Typically, we don’t publish our daily notes when China’s markets are closed, but given today’s volatility, we have a special edition.
Despite the holiday, things were not quiet this morning as China announced a 34% retaliatory tariff to match new tariffs from the US announced yesterday. The retaliatory tariffs are due to begin on April 10th. The back-and-forth is causing volatility today during US trading.
President Trump responded by claiming that Beijing had “panicked” and made a strategic error. On his Truth Social platform, Trump said that China panicked and it making a mistake.
Nonetheless, we still believe that both sides are preparing for negotiations. Today’s knee-jerk volatility is not capturing the full picture with China closed.
It is important to remember that exports to the United States now represent only 14% of China’s total exports, down from 21% in 2006. The potential impact on China’s economy overall is much less today than it would have been in the past.
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