Investment Rating - The report indicates a cautious outlook on the industry, with a potential downside risk of 0.5 percentage points to the 2025 GDP growth forecast if US-China tariffs remain at current levels [11]. Core Insights - The report highlights that while direct tariff impacts have been mitigated by trade rerouting, growth and deflationary pressures are mounting, with real GDP year-on-year expected to slip by approximately 1 percentage point to around 4.5% in the second quarter of 2025 [9][11]. - The report discusses the ongoing US-China trade tensions, noting that the terminal tariff rates will remain elevated despite potential de-escalation talks [5][6]. - It emphasizes the need for policy measures to support consumption and economic growth, including a supplementary fiscal package and monetary easing [34][40]. Summary by Sections Tariff Impact - The report outlines that headline reciprocal tariffs would remain at 60%, but the trade-weighted tariff hike would be reduced to 34% with exemptions on certain products [6][7]. - It notes that the direct tariff shock was mitigated in April, but exports to the US could decline further in May [13]. Economic Growth - Real GDP growth is projected to decline, with a new forecast indicating a drop to around 4.5% year-on-year in 2Q25 [9][10]. - The report suggests that deflationary pressures are likely to persist, affecting overall economic performance [28][30]. Consumption and Investment - There is a noted decline in consumer spending, particularly during the Labor Day holiday, indicating subdued consumption appetite [23][24]. - The report identifies potential investment opportunities in manufacturing upgrades, urban infrastructure renewal, and basic scientific research [36][40]. Policy Measures - The report outlines a series of policy measures aimed at stimulating the economy, including faster issuance of government bonds and a consumer goods trade-in program [34]. - It anticipates a Rmb1-1.5 trillion supplementary fiscal package in the second half of 2025 to support economic recovery [34][40].

FICC Research Economics 2 May 2025 China Outlook Trade war hits, door for talks is open The deterioration in the NBS PMI was broad based, from export orders to employment to production, with negative spillovers to the services sector. With the trade war escalating, we estimate 3% of total employment could be at risk. Door to trade talks may be opening, but China urges "sincerity". Door to trade talks opening Newsflow on trade talks between the US and China remains fluid. Following China's denial of Presiden ...