Week Ahead: US GDP, Inflation And Jobs In Focus Amid Tariff Mess – BoJ Meets

Central Bank

Economic

China–U.S. Trade War

Summary:

Barrage of US data to shed light on US economy as tariff war heats up.GDP, PCE inflation and nonfarm payrolls reports to headline the week.Bank of Japan to hold rates but may downgrade growth outlook.Eurozone and Australian CPI also on the agenda, Canadians go to the polls.

Trump continues to sow tariff confusion

There was finally some relief for financial markets in the past week when US President Trump offered investors a rare glimmer of hope that there is light at the end of the trade war tunnel. However, it didn’t take long for the light to start dimming again as the trade conflict took another complicated turn after it became apparent that the Trump administration’s climbdown in the standoff against China isn’t as big as previously anticipated.

Trump’s carrot-and-stick approach in his bid to get China onto the negotiating table isn’t proving very effective, particularly when the carrot is much smaller than the stick. For Beijing, the trade war has escalated to a level where national pride is at stake, hence, it is not blinking as easily as Trump assumed it would. This is already posing a problem for the White House, which has signalled that the Trump administration is willing to lower the exorbitant 145% tariff rate within two-three weeks if there is a deal.

But according to Chinese officials, the two sides have not even started talks, casting doubt on Trump’s negotiating tactic. Furthermore, other concessions, for example on auto tariffs for US car manufacturers, are far from a done deal, with Trump even threatening to raise them for auto imports from Canada.

All this is only worsening the uncertainty for US businesses rather than offering some clarity. So, although the acknowledgement by the White House that it is keeping an eye on the market turbulence and Trump is keen to reach trade agreements with America’s main trading partners is a positive sign, it does little in terms of easing the immediate fears about the country’s economic prospects.

Dollar and Wall Street on recession watch

Those concerns will either be fuelled or reduced in the coming week, as there’s a flurry of top-tier economic releases on the way. Kicking things off on Tuesday are the consumer confidence index for April and JOLTS job openings for March. On Wednesday, the advance estimate for GDP growth will be monitored very closely amid some predictions that the US economy contracted in the first quarter.

The Atlanta Fed’s GDPNow model is estimating an annualized drop of 2.2% in GDP, but analysts according to a Reuters poll are forecasting growth of 0.4%, down sharply from the Q4 pace of 2.4%.

The ADP employment survey is also out on Wednesday, along with the latest PCE inflation and consumption numbers. The all-important core PCE price index is expected to have risen by 0.1% month-on-month in March to give an annual figure of 2.5%, which would be a decrease from the prior 2.8%.

Personal consumption is forecast to have maintained month-on-month growth of 0.4%, suggesting that US households continue to spend at a healthy clip.

Other data on Wednesday will include the Chicago PMI as well as pending home sales. On Thursday, the Challenger Layoffs for April might attract some attention but the bigger focus that day will be the ISM manufacturing PMI. The index is expected to have declined in April from 49.0 to 47.9, with investors also likely to track the direction of the employment and prices sub-indices.

The real highlight, however, will be Friday’s nonfarm payrolls report, amid the intense speculation about how soon the Fed will cut rates. Jobs growth is projected to have slowed from 228k in March to 130k in April, with the unemployment rate staying unchanged at 4.2%. Average earnings probably grew by 0.3% in April.

A disappointing NFP print, combined with a soft core PCE reading could bolster expectations of a 25-basis-point rate cut in June as opposed to July, though bets for the May meeting would likely remain very low. For the US dollar, a worrying set of data would almost certainly be negative, but on Wall Street, stocks could rise if increased rate cut hopes are not overshadowed by recession fears.

BoJ to keep rates steady as outlook deteriorates

The Bank of Japan is not anticipated to announce any changes to its monetary policy settings when it meets on Thursday, as policymakers take time to assess the impact of Donald Trump’s tariffs on the Japanese economy before deciding whether to hike interest rates again.

Inflation in Japan edged up to 3.2% y/y in March as per the core CPI measure and the BoJ remains confident that the recent wage growth momentum is now becoming more sustainable. However, the downside risks to growth have increased markedly since February when Trump unleashed the first of many waves of tariffs, with Japan not being spared from the universal 10% levies, nor the sectoral tariffs on steel and autos.

The BoJ is therefore expected to lower its growth forecasts in its latest quarterly Outlook Report. The question is whether the Bank will also cut its inflation projections or keep them more or less unchanged. Policymakers don’t think at this stage that tariffs pose a significant danger to their inflation goal so they will probably keep the door to future rate hikes wide open.

If Governor Ueda goes a step further and explicitly signals that further rate hikes are likely in the coming months, this could boost the yen, which is enjoying strong safe-haven demand lately.

In terms of data, the preliminary industrial output for March is due on Wednesday, to be followed by some jobs stats on Friday.

Euro looks to flash GDP and CPI as uptrend stalls

The flash PMI numbers for April painted a grim picture for the Eurozone economy as businesses were hit by a new round of duties. With the impact of the US tariffs on global trade only now being felt, investors will probably ignore the preliminary GDP figures for the first quarter that are out on Wednesday.

Even if the euro area notched up impressive growth in the first three months of the year, this is unlikely to dampen rate cut expectations for the European Central Bank as inflation is falling and growth forecasts are being downgraded. ECB policymakers have already slashed rates by a total of 175 bps and have strongly hinted that they’re not done yet.

If Friday’s flash CPI data shows that inflationary pressures continue to subside, the ECB will have little reason to pause. The headline rate of CPI moderated to 2.2% y/y in March and is forecast to ease further to 2.0% in April.

The euro could come under some pressure if the CPI prints are on the soft side, but the primary driver in the FX domain will be the US dollar, and specifically, sentiment towards Trump’s trade policies. Fresh efforts by the White House to defuse tensions could spur another bounce in the US dollar, setting back the euro’s uptrend.

Australian CPI may not alter RBA bets

Inflation will also be in the spotlight in Australia where the quarterly CPI readings will be published on Wednesday. The Reserve Bank of Australia has only cut rates once during this cycle amid slow progress in getting inflation under control.

The monthly measure dipped from 2.5% to 2.4% y/y in February in a huge relief after rising for three consecutive months. The quarterly figure covering the first three months of 2025 is expected to inch lower too. But for the RBA, the underlying gauges of CPI might be more important. If they extend their decline in Q1 and the monthly rate also falls, there would be nothing stopping the RBA from cutting rates in May.

However, this may not necessarily trigger much reaction in the Australian dollar, as a 25-bps rate cut is already fully priced in for May and for almost every other meeting in the remainder of the year.

Aussie traders will also be watching the manufacturing PMIs out of China for any signs that the steep US levies are hurting the world’s second largest economy. Both the official and Caixin manufacturing PMIs are due on Wednesday.

Canadians to likely pick Carney as next PM

Canadians will be voting in a general election on Monday after former Bank of England and Bank of Canada governor Mark Carney called a snap vote following Justin Trudeau’s resignation. Carney’s Liberal party was all set to lose the election until Trump’s trade tirade reinvigorated the party among voters.

Trudeau’s and Carney’s handling of Trump’s threats to Canada’s economy as well as its sovereignty appear to have earned them plaudits, pushing the Liberals ahead of the Conservatives, who were poised for victory before the trade war escalation.

There’s still room for surprises, however, as the Liberals may fail to win a majority, and with their current coalition partners, the New Democratic Party, expected to lose most of its seats, a hung parliament may not go down well with Canada’s stock market and the local dollar.

But should the Liberals secure a majority, the Canadian dollar could gain slightly, although it’s likely to benefit more from a shock Conservative win, as they’ve pledged bigger tax cuts.

Source: XM

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Adam

Stocks

Economic

China–U.S. Trade War

Global financial markets are relatively stable heading into the end of the week, with risk appetite showing further signs of improvement. European equities are trading modestly higher, following rebounds seen earlier in Japan and Hong Kong. However, US futures are slightly in the red despite strong earnings reports from tech heavyweights Alphabet and Intel. Still, one supportive development is the continued pullback in US Treasury yields, with the 10-year dipping below 4.3% mark—viewed as a positive sign for US assets.

Meanwhile, the trade war front is seeing renewed speculation, especially regarding US-China tariff relations. According to multiple media reports, China has quietly granted tariff exemptions on some US goods—including integrated circuits—previously subject to its 125% retaliatory duties. While no formal statement has been issued by Chinese authorities, there are reports of internal government consultations with foreign businesses. A list of 131 product categories is circulating on social media is believed to outline those under consideration for exemption. These steps signal a possible softening of Beijing’s stance and a willingness to preserve critical supply chains.

Meanwhile, US President Donald Trump told Time magazine that China is actively engaging in talks with Washington to strike a tariff deal, and claimed that President Xi Jinping had recently called him. However, China’s Foreign Ministry declined to comment on Trump’s statement and previously warned the US to stop “misleading the public” about the status of bilateral negotiations. The conflicting narratives underscore the fog of uncertainty surrounding trade diplomacy, though market participants appear cautiously hopeful that both sides are seeking a path to de-escalation.

In the currency markets, the week’s performance leaderboard remains largely unchanged. Kiwi is holding firmly at the top. Sterling and Aussie are also among the week’s better performers. On the other end of the spectrum, Swiss franc, Japanese Yen, and Euro are lagging—reflecting fading safe-haven demand. Dollar and Loonie sit in the middle.

In Europe, at the time of writing, FTSE is up 0.28%. DAX is up 0.87%. CAC is up 0.65%. UK 10-year yield is down -0.021 at 4.482. Germany 10-year yield is up 0.018 at 2.471. Earlier in Asia, Nikkei rose 1.90%. Hong Kong HSI rose 0.32%. China Shanghai SSE fell -0.07%. Singapore Strait Times fell -0.21%. Japan 10-year JGB yield rose 0.03 to 1.34.

Canada retail sales fall -0.4% mom in Feb, but core spending offers rebound hopes

Canadian retail sales declined by -0.4% mom to CAD 69.3B in February, in line with market expectations. The overall weakness was driven primarily by a -2.6%mom drop in motor vehicle and parts dealers, with all four store categories in the subsector posting declines.

However, beneath the surface, the data showed encouraging signs. Core retail sales—which exclude fuel and vehicle-related sales—rose by 0.5% mom.

Looking ahead, Statistics Canada’s advance estimate points to a 0.7% mom increase in total sales for March.

SNB’s Schlegel: Growth may miss forecasts due to trade uncertainty

Swiss National Bank Chairman Martin Schlegel warned at the central bank’s annual general meeting that high levels of trade policy uncertainty continue to cloud the economic outlook.

“It remains very uncertain how inflation and the economy in Switzerland will develop,” Schlegel said, adding that “an economic slowdown cannot be ruled out.”

Growth forecasts are already under pressure, with SNB’s March projection of 1% to 1.5% GDP growth this year falling below Switzerland’s long-term average of 1.8%.

Schlegel reiterated that SNB stands ready to adjust policy if needed, including interest rate changes and foreign exchange interventions. However, he acknowledged the limits of monetary policy in addressing deeper structural uncertainty.

“Price stability cannot prevent trade policy uncertainty,” he cautioned, but emphasized that maintaining stable prices provides an essential foundation for the broader economy.

UK retail sales rise 0.4% mom in March, 1.6% qoq in Q1

UK retail sales surprised to the upside in March, rising by 0.4% mom, defying market expectations for a -0.3% mom decline.

The unexpected strength was attributed largely to favorable weather conditions, which lifted sales at clothing and outdoor retailers. However, this gain was partially offset by weaker performance at supermarkets.

Looking beyond the monthly figure, the broader quarterly performance painted an encouraging picture of consumer resilience. Retail sales volumes grew by 1.6% qoq 1.7% yoy in Q1. These results indicate that UK consumers remain relatively active despite broader economic uncertainties.

Tokyo CPI core surges to 3.4% in April, strengthening case for BoJ June hike

Inflation in Japan’s capital city surged in April, with Tokyo core CPI (excluding food) accelerating from 2.4% yoy to 3.4% yoy, above the 3.2% yoy forecast. The more domestically focused core-core measure (excluding food and energy) also rose sharply, from 2.2% yoy to 3.1% yoy. Headline CPI jumped from 2.9% yoy to 3.5% yoy.

Despite the upside surprise, BoJ is still expected to hold rates steady at its May 1 policy meeting as it gauges the broader impact of recent US tariffs and awaits progress in ongoing trade negotiations. However, with inflation gathering pace across key categories, market expectations are shifting toward a rate hike as soon as June.

USD/CHF Mid-Day Outlook

USD/CHF’s corrective recovery from 0.8038 is still in progress and intraday bias stays on the upside. Further rise would be seen but upside should be limited by 38.2% retracement of 0.9200 to 0.8038 at 0.8482. On the downside, below 0.8196 minor support will bring retest of 0.8038. Firm break there will resume larger down trend.

Markets Steady as US Yields Dip Amid Continuous Tariff Rumors_1

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8794) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Markets Steady as US Yields Dip Amid Continuous Tariff Rumors_2

source : actionforex

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Adam

Central Bank

Economic

China–U.S. Trade War

After years dominated by the pandemic, supply chains, energy and inflation, there was a new topic topping the agenda at the World Bank and International Monetary Fund’s Spring Meetings this year: tariffs.

The IMF set the tone by kicking off the week with the release of its latest economic forecasts, which cut growth outlooks for the U.S., U.K. and many Asian countries. While economists, central bankers and politicians have been engaged in panels and behind-the-scenes talks, many are attempting to work out whether trade tensions between China and the U.S. are — or perhaps are not — cooling.

Policymakers from the European Central Bank that CNBC spoke to this week broadly stuck a dovish-leaning tone, indicating they saw interest rates continuing to fall and few upside risks to euro zone inflation. However, all stressed the current high levels of uncertainty, the need to keep monitoring data, and the high risks to the growth outlook — sentiments also echoed by Bank of England Governor Andrew Bailey in his interview with CNBC on Thursday.

These were some of the main messages from ECB members this week.

Christine Lagarde, European Central Bank president

On inflation and monetary policy:

“We’re heading towards our [inflation] target in the course of 2025, so that disinflationary process is so much on track that we are nearing completion. But we have the shocks, you know, and the shocks will be a dampen on GDP. It’s a negative shock to demand.”

“The net impact on inflation will depend on what countermeasures are eventually taken by Europe. Then we have to take into account the [German] fiscal push by the defense investments, by the infrastructure fund.”

“We have seen successive movements, you know, announcement [of U.S. tariffs], and then a pause, and then some exemptions. So we have to be very attentive... Either we cut, either we pause, but we will be data dependent to the extreme.”

On market moves:

“When we had done our projections, we anticipated that... the dollar would appreciate, the euro would depreciate. It’s not what we saw. And there have been some counter-intuitive movements in various categories.”

“The German market has obviously been shocked in a positive way by the program soon to be put in place by the German government, with a commitment to defense, with a commitment to a big fund for infrastructure development.”

Klaas Knot, The Netherlands Bank president

On tariff uncertainty:

“If I look back over the last 14 years, in the initial days of the pandemic I think that was comparable uncertainty to what we have now.”

“In the short run, it’s crystal clear that the uncertainty that is created by the unpredictability of the tariff actions by the U.S. government works as a strong negative factor for growth. Basically, uncertainty is like a tax without revenue.”

On the inflation impact:

“In the short run, we will have lower growth. We will probably also have lower inflation. As we also see, the euro is appreciating as energy prices have also come down. So together with the sort of negative factor uncertainty in the short run, it’s crystal clear that it will accelerate the disinflation.”

“But in the medium term, the inflation outlook is not all that clear. I think there are still these negative factors. But in the medium term, you might get retaliation. You might get the disruption of global value chains, which might also be inflationary in other parts of the world than the U.S. only. And then, of course, we have the fiscal policy coming in in Europe. So this is actually a time in which you need projections.”

On a June rate cut and market pricing for two more ECB rate cuts in 2025:

“I’m fully open minded. I think it’s way too early to already take a position on June, whether it would be another cut. It will fully depend on these projections.”

“I would need to see a more structured analysis of the impact on the inflation profile ahead of us, and only then can I say whether the market is pricing fair or whether I don’t.”

Robert Holzmann, Austrian National Bank governor

On the need to wait for more data and news on tariffs:

“We have not seen this uncertainty now for years... unless the uncertainty subsides, by the right decisions, we will have to hold back a number of our decisions, and hence, we don’t know yet in what direction monetary policy should be best moved.”

“Before looking at data in detail, the question is, what kind of political decisions will be taken? Is it that we will have some tariff increases? Is it that we will have strong tariff increases? Is it that we will have retribution by high counter tariffs?”

On the ECB’s April rate cut:

“I think there’s a broad consensus [on rates]. But of course, at the margin, people differ.”

“My assessment is that at this time, it wasn’t clear yet to what extent [tariff] countermeasures were being taken. Because with countermeasures in Europe, prices may have increased. Without countermeasures, quite likely the price pressure is downward. And for the time being, we don’t know yet the direction.”

On the direction of interest rates:

“I think if the recent noises about an arrangement [on trade] were to be true, in this case, quite likely it is more towards the downside than the upside with regard to prices. But this can be changed with different decisions and the result of which, we may even imagine in [the] other direction. For the time being, no, it will be down.”

“There may be further cuts this year, but the number is still outstanding.”

Mārtiņš Kazāks, Bank of Latvia governor

On opportunity from tariffs:

“With all this uncertainty and vulnerability, this is also the time of opportunities for Europe.”

“It’s a time for Europe to grasp all the aspects of being an economic superpower and becoming a really fully-fledged political and geopolitical superpower, and this requires doing all the decisions that in the past, were not carried out fully.”

“This requires political will, political guts to make those decisions, and to strengthen the European economy and assert its place in a global world.”

On market reaction to tariffs:

“So far it seems to be relatively orderly ... but if one looks at the spillovers to Europe, the financial markets are working more or less fine, we haven’t seen spreads exploding or anything like that.”

“But in terms, however, of the macro scenarios, this uncertainty is extremely elevated in the sense that, given the possible outcomes, the multiple scenarios and their probabilities are very similar with the baseline [tariff] scenario.”

Source: cnbc

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Michelle

Economic

Forex

Stocks

On April 25, 2025, the University of Michigan released the final reading of Michigan Consumer Sentiment report for April. The report indicated that Consumer Sentiment decreased from 57.0 in March to 52.2 in April, compared to analyst forecast of 50.8.

Current Economic Conditions declined from 63.8 in March to 59.8 in April, while Index of Consumer Expectations pulled back from 52.6 to 47.3.

Year-ahead inflation expectations increased from 5.0% in March to 6.5% in April, reaching the highest level since 1981. Long-run inflation expectations grew from 4.1% to 4.4%.

The University of Michigan commented: “Consumers perceived risks to multiple aspects of the economy, in large part due to ongoing uncertainty around trade policy and the potential for a resurgence of inflation looming ahead.”

U.S. Dollar Index settled near the 99.60 level as traders reacted to Consumer Sentiment data. The Index remains stuck below the psychologically important 100.00 level amid tariff uncertainty.

Gold settled near session lows at $3285 after the release of the report. Gold traders continue to take profits after the strong rally.

SP500 gained some ground after the release of the better-than-expected Michigan Consumer Sentiment report. Currently, SP500 is trying to settle above the 5500 level. Traders stay bullish amid hopes for a trade deal between the U.S. and China.

Source: FX Empire

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Gerik

Economic

World Bank and IMF align on downward revision

On April 24, the World Bank (WB) and the International Monetary Fund (IMF) jointly revised their growth forecasts for the Asia–Pacific region, citing mounting global trade frictions, weakening demand, and structural vulnerabilities. According to the WB’s latest East Asia and Pacific economic update, regional growth is now projected at 4.0% for 2025, down from 5.0% in 2024. The IMF’s revision is even sharper, cutting its outlook for 2025 to 3.9%—a 0.5 percentage point drop from its previous forecast and the steepest revision since the COVID-19 pandemic.

These parallel downgrades reflect a clear correlation between rising global protectionism and weakening regional investment, consumption, and export performance. The synchronized nature of the revisions signals a structural shift rather than a temporary cyclical dip.

Trade-based growth model under pressure

At the heart of the slowdown is Asia’s heavy reliance on open trade and global supply chain integration. According to the IMF, Asia contributed nearly 60% of global growth in 2024, making its current deceleration particularly concerning. However, the traditional model—built on export-driven momentum and liberalized trade regimes—is showing signs of fatigue amid tighter financial conditions and growing geopolitical uncertainty.

Both institutions underscore that declining global demand, rising trade barriers, and financial tightening have significantly constrained the region’s external growth engines. This suggests a causal relationship: as external trade shrinks, Asia’s high-growth economies face constrained fiscal space and productivity pressures, especially in aging societies and economies with limited domestic consumption bases.

Divergent outlooks between emerging and advanced economies

The IMF’s breakdown reveals a more granular picture: growth in advanced economies in the region is forecast to slow to just 1.2% in 2025, a significant 0.7 percentage point downgrade. Meanwhile, emerging and developing economies are expected to grow at a more robust 4.5%, but this too marks a 0.5 percentage point decrease. The broad-based nature of these revisions—across income levels and country profiles—suggests that no segment of the region is fully insulated from the global downturn.

The divergence between advanced and emerging Asia illustrates both a correlation and contrast in economic resilience. Advanced economies, more exposed to global capital markets and trade volatility, are suffering sharper slowdowns. In contrast, developing economies retain more momentum but remain vulnerable to structural constraints such as aging demographics and underdeveloped consumer markets.

Policy response: From export dependency to balanced growth

To counter these headwinds, both the WB and IMF are urging governments to pivot toward more balanced growth models. Key recommendations include investing in productivity-enhancing technologies, promoting domestic demand, and diversifying export markets. The WB highlights reform progress in Malaysia and Thailand, where new technologies are being integrated into labor markets, and in Vietnam, where service-sector competition is being liberalized.

The IMF, meanwhile, emphasizes regional integration and resilience through agreements like RCEP, which could enhance intra-Asian trade in goods, services, and digital economy sectors. Such frameworks could also help harmonize regulatory standards, creating buffers against future global shocks.

This reflects a strategic shift: rather than waiting for global demand to recover, Asia is being advised to build internally driven and more shock-resilient economies.

Navigating fragility with reform and regional cooperation

The 2025 growth downgrades by both the World Bank and IMF mark a sobering moment for Asia–Pacific policymakers. While not yet signaling a regional recession, the downward momentum reveals that structural shifts—both global and internal—are weakening Asia’s traditional growth foundations.

To preserve long-term growth, governments must rethink dependence on export-led development, strengthen domestic demand engines, and invest in cross-border frameworks that support economic integration and stability. In a post-globalization world of rising uncertainty, the region’s future resilience will depend not just on reactive policy, but on proactive structural transformation.

Source: IMF

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Glendon

Commodity

Forex

Economic

China–U.S. Trade War

Gold prices fell 2% on Friday and were en route for a weekly dip as the dollar rose and signs of easing U.S.-China trade tensions after a report that Beijing has exempted some U.S. goods from its tariffs weighed on bullion.

Spot goldwas down 1.9% at $3,284.13 an ounce as of 09:10 a.m. EDT (1310 GMT). Bullion is down 1.2% for the week.

U.S. gold futuresslipped 1.6% to $3,294.50.

"The apparent detente on tariffs is negatively affecting gold prices ... But so far we've not seen substantial liquidations," said TD Securities commodity strategist Daniel Ghali.

"However, we know that they've continued to buy the dip over the last few sessions, so we think gold can resume its upward trajectory."

China is considering exempting some U.S. imports from its 125% tariffs and is asking businesses to identify goods that could be eligible, according to businesses notified.

Earlier this week, U.S. President Donald Trump suggested a de-escalation of their tit-for-tat tariff battle , saying direct talks were already underway.

The U.S. dollar, meanwhile, rose and was on track for its first weekly gain since March, making bullion more expensive for overseas buyers.

Gold, traditionally seen as a hedge against geopolitical and economic uncertainties, scaled a record high of $3,500.05 per ounce and has gained more than 25% so far this year, owing to US-China trade tensions and strong central bank demand.

Gold Down 2% As US-China Trade Tensions Ease, Dollar Rises_1

"Trade war concerns were the main reason behind all the prior gold buying. But it could still be a while before we see actual progress and so those concerns are not completely gone just yet," said Fawad Razaqzada, market analyst at City Index and FOREX.com.

Elsewhere, spot silverslipped 1.1% to $33.21 an ounce, but was heading for its third straight weekly gains.

Platinumfell 0.5% to $965.75 and palladiumdipped 1.5% to $939.82.

Source: TradingView

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Warren Takunda

Economic

China–U.S. Trade War

Xi Jinping has announced a plan to counter China’s continuing economic problems and the impact of the US trade war, as reports swirl that it could drop tariffs on some US products, including semiconductors.

Friday’s meeting of the politburo was convened to discuss China’s economy, which since the pandemic has faced difficulties fuelled by a housing sector crisis, youth unemployment and Donald Trump’s tariffs on all Chinese imports to the US.

A readout of the meeting published by the official state media outlet Xinhua said China’s economy had showed a “positive trend” with increasing social confidence in 2025, but “the impact of external shocks has increased”.

“We must strengthen bottom-line thinking, fully prepare emergency plans and do a solid job in economic work,” it said.

In a reference to Trump’s global tariffs, the readout said Beijing would “work with the international community to actively uphold multilateralism and oppose unilateral bullying practices”.

he US president has again insisted that Xi has called him to discuss the border taxes, despite Beijing denying any contact between the two countries over their bitter trade dispute.

In an interview conducted on Tuesday with Time magazine and published on Friday, Trump repeated the claim but did not say when the call took place or specify what was discussed. “He’s called,” Trump said of Xi. “And I don’t think that’s a sign of weakness on his behalf.”

On Thursday, a spokesperson for China’s foreign affairs ministry, Guo Jiakun, said of the reports of talks: “None of that is true.”

Friday’s poliburo readout proposed a series of interventions to bolster the domestic economy and protect people and businesses from the impact of Trump’s tariffs, including increasing unemployment insurance payouts. It promised to increase low and middle incomes, develop the service industry and boost consumption.

“We should take multiple measures to help enterprises in difficulties,” it said. “We should strengthen financing support. We should accelerate the integration of domestic and foreign trade.”

It stressed the need for more proactive macroeconomic policies, faster development of a new real estate model and increased housing stock, and “stepping up” city renewal programmes and urban renovation.

Wen-ti Sung, a non-resident fellow at the Atlantic Council’s Global China Hub, said the politburo’s decisions showed Beijing “clearly views the international macroeconomic environment as hostile” and was willing to take on high domestic inflation to weather the tariffs.

“[This] hints that China will be digging into the trenches and is preparing for a long trade fight with Trump,” he said.

Sung said Beijing was “doubling down on boosting domestic demand” and bolstering fiscal stimulus as the international market showed no signs of significant improvement.

The meeting was held amid reports that Chinese authorities were considering a list of US products to exempt from the 125% tariffs imposed on all US imports. Earlier reports from Bloomberg and Reuters said medical equipment, semiconductors and some industrial chemicals such as ethane were being considered.

On Thursday, a Shenzhen-based supplier posted online that it had been notified by the customs agency that eight semiconductor products would no longer attract the 125% duty.

On Friday, the head of the American Chamber of Commerce in China, Michael Hart, said the Chinese authorities had been asking members what products they imported from the US that they could not find anywhere else.

He welcomed the early signs that both sides were reviewing tariffs and starting to produce lists of excluded items. Stock markets across the Asia Pacific region rose after the reports.

The trade war has hit the US and Chinese economies, and the tariff exemptions are likely to be a sign of the parties trying to ease their way out. The US had already exempted some categories of Chinese-made products from tariffs, including smartphones and laptops. This week, Trump said his tariffs on China would “come down substantially but it won’t be zero”.

But in public the two governments have given different accounts on the status of negotiations on ending the trade war.

On Friday afternoon, China’s foreign ministry reiterated its claim that the US and China were not engaged in any negotiations on tariffs, contradicting Trump’s claims on Thursday.

Speaking to reporters at the White House, Trump said the two sides were talking. “We may reveal it later, but they had meetings this morning, and we’ve been meeting with China,” he said, declining to say who “they” were.

The remarks appeared to be in response to the Chinese commerce ministry’s spokesperson, He Yadong, earlier saying there were “currently no economic and trade negotiations between China and the United States”.