Citi analysts hailed Monday's agreement to slash reciprocal tariffs as “more positive than expected,” forecasting strong gains for Hong Kong and mainland Chinese equities. The move reduces near-term headwinds on China's exports and GDP, while paving the way for further tariff rollbacks—particularly the 20% levy tied to China's alleged role in fentanyl trafficking.

Tariff Cuts Exceed Expectations

• U.S. tariffs on China fall to 30% from 145%

• Chinese duties on U.S. goods shrink to 10% from 125%

• Potential removal of the 20% fentanyl-related tariff seen as “low-hanging fruit”

Citi noted that the scale of reductions “was likely more than the market expected,” injecting fresh optimism into Chinese markets.

Impact on Stimulus and Policy

While the tariff reprieve is a boon for trade, it diminishes the urgency for large-scale fiscal support in China. Citi warns that the prospect of ¥1.5 trillion ($210 billion) in additional stimulus has “significantly reduced,” potentially prompting policymakers to adopt a wait-and-see stance.

Buoyant Equities on Improved Sentiment

With trade tensions easing and local valuations still attractive, Citi reaffirmed its positive view on HK/PRC equities. Investors tracking the immediate market reaction can monitor today's top-performing stocks via the Market Biggest Gainers API, which highlights equity leaders across major Asian exchanges.

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