The U.S. has announced tariffs of 25% on imported steel and 10% on imported aluminum. How significant is this for the Chinese market? Will it impact A-shares’ upward trend?
1. Strong Performance of U.S.-Listed Chinese Stocks
Last night, major U.S. stock indices rebounded, ending their recent decline. The Dow Jones rose 0.38%, the Nasdaq gained 0.98%, and the S&P 500 increased by 0.67%. Meanwhile, Chinese stocks listed in the U.S. performed even better, rising 2.69% overnight. Since the beginning of the year, these stocks have gained a total of 22.53% over 19 consecutive trading days, compared to the Nasdaq’s 3.28% increase in the same period.
2. New U.S. Tariffs on Steel and Aluminum
The U.S. government announced new tariffs: 25% on imported steel and 10% on imported aluminum. China remains the world’s largest producer of both materials, accounting for 53.7% of global crude steel production and 58.3% of global primary aluminum production in 2022.
3. Limited Impact on China’s Market
However, due to existing trade policies, the U.S. does not import large quantities of steel and aluminum from China. In 2024, the largest supplier of steel to the U.S. is Canada (25%), followed by Brazil and Mexico (12%), with additional imports from South Korea and Vietnam. For aluminum, Canada supplied 79% of the U.S.’s primary aluminum imports in the first 11 months of 2024, followed by Mexico, Australia, and Jamaica.
4. Tariffs Unlikely to Affect China via Indirect Exports
There has been speculation that countries like Canada and Mexico might be re-exporting Chinese steel and aluminum to the U.S., but data suggests otherwise. Canada is the world’s fourth-largest aluminum producer and a key player in steel production and exports. Mexico ranks 15th globally in steel production and is the second-largest producer in Latin America. Their exports to the U.S. primarily come from domestic production rather than Chinese imports.
5. Global Markets Rally While A-Shares and Hong Kong Stocks Adjust
Despite the tariff announcement, global stock markets saw gains, including those in the U.S. and Europe. Canada and Mexico’s markets also moved higher. The decline in A-shares and Hong Kong stocks today appears to be a normal technical correction after recent gains rather than a reaction to the tariffs. The Hang Seng Index fell around 0.6% this morning, while the Hang Seng Tech Index dropped 1.76%, but overall, the market remains stable.
6. A-Shares Show Signs of Stabilization
A-shares experienced some volatility in the morning session, with the Shanghai Composite Index dropping up to 0.53% before recovering. By midday, the decline narrowed to 0.16%, with similar small losses in other key indices: the Shenzhen Component Index (-0.44%), the ChiNext Index (-0.91%), and the STAR Market Composite (-0.56%).
Looking at the broader trend, the Shanghai Composite is currently testing its 60-day moving average. Since mid-January, it has been approaching the 3,400-point resistance level, which may require stronger trading volume to break through. While a long-term technology-driven bull market is taking shape, short-term fluctuations and corrections are expected.
As the market enters its seasonal rally, investors should remain cautious, particularly with highly speculative themes. Risk management should be a priority to navigate potential market shifts effectively.