Hong Kong stocks slip amid stimulus hopes and tariff tensions

[WORLD] Hong Kong stocks fell as investors awaited an upcoming briefing from Chinese authorities on potential stimulus measures, amid uncertainties over economic support for the country's recovery and trade tensions with the US. The Hang Seng Index fell 0.5 percent to 21,882.57 as of 9.45 a.m. local time. The Hang Seng Tech Index fell 0.2 percent. On the mainland, the CSI 300 Index dipped 0.2 percent, and the Shanghai Composite Index sank 0.3%.

Investor caution has been heightened by the deepening trade dispute between the United States and China, which has seen a rapid escalation in tariffs over the past month. On April 9, the US raised tariffs on Chinese goods to 125 percent, and shortly after, clarified that the effective rate would be 145 percent when combined with existing levies. China responded with its own increase, lifting tariffs on US goods to 84 percent and placing several American companies on export control and unreliable entities lists. These tit-for-tat measures have injected fresh uncertainty into the global trade environment, weighing on investor sentiment in Hong Kong and across regional markets.

The ongoing tariff battle has prompted Chinese policymakers to consider a suite of stimulus measures aimed at cushioning the economy from external shocks. Analysts expect the end-of-April meeting of China’s top leadership to result in a significant fiscal package, potentially exceeding 1 trillion yuan ($137 billion), with a focus on boosting domestic consumption rather than traditional investment. This shift reflects concerns that the impact of US tariffs, which are expected to become more pronounced in the second quarter, could dampen export-driven growth and necessitate a stronger emphasis on internal demand.

China’s economic performance in the first quarter of 2025 has so far exceeded expectations, with GDP expanding by 5.4 percent year-on-year, buoyed by a surge in exports and resilient manufacturing and high-tech sectors. However, much of the export strength is believed to be the result of a “pre-tariff rush,” as exporters accelerated shipments ahead of the new US tariffs. Analysts caution that this front-loading effect may not be sustainable, and the coming months could see a slowdown in trade-driven growth as the full impact of higher tariffs is felt.

Amid these headwinds, global investment banks have revised down their growth forecasts for China. UBS, Citi, and Goldman Sachs have all trimmed their projections for 2025, citing the negative effects of the trade war and persistent weakness in domestic demand. The Chinese government, however, has reaffirmed its commitment to achieving its growth target of around 5 percent, signaling readiness to implement further monetary and fiscal support, including incentives to spur consumer spending and investment in key sectors.

In addition to fiscal measures, China’s central bank is expected to deploy a mix of quantitative and structural policy tools to maintain liquidity and support targeted sectors. This could include a reserve requirement ratio cut and potential interest rate reductions in the coming months. Structural policies aimed at providing relief to the foreign trade sector and encouraging technological innovation are also anticipated, as authorities seek to offset the drag from weaker external demand and mounting deflationary pressures.

The scale and speed of stimulus implementation will depend on both domestic economic dynamics and the evolving external environment. Legislative approval for major fiscal measures is expected to be sought at the upcoming session of the National People’s Congress Standing Committee. If approved, these measures could provide a timely boost to market confidence, demonstrating Beijing’s determination to sustain growth despite intensifying trade challenges