Temporary Truce Between the U.S. and China Boosts Imports but Leaves Global Uncertainty

China–U.S. Trade War

Economic

Summary:

The recent 90-day tariff truce between the U.S. and China has sparked a wave of import activity from American firms, yet widespread concerns remain about what will follow once the grace period ends...

U.S.–China Tariff Truce Ignites a Surge in Orders

Following a joint announcement on May 14, the U.S. and China agreed to simultaneously suspend 91% of additional tariffs and pause 24% of reciprocal duties, offering businesses brief relief from trade pressures. The immediate response was a sharp rise in U.S. imports from China as firms raced to restock inventories during the 90-day window.

Logistics firms report a rush of container bookings, with some U.S. importers preparing thousands of containers in Chinese ports. Supply chain analysts predict shipping costs from China’s ports to the U.S. West Coast may climb by 20% in the coming weeks due to rising demand. Toy makers, apparel companies, and other consumer goods retailers are rapidly placing new orders.

While larger players like Viahart and logistics firms are ramping up trans-Pacific shipments, even Chinese manufacturers and freight operators are now running on expanded shifts to accommodate the volume spike. Ports in Yangzhou and Dongguan, for instance, have reported sudden spikes in activity.

Risk Management Takes Center Stage as Uncertainty Looms

Despite the short-term boost, U.S. businesses remain wary of what will come after the truce ends in mid-August. The temporary nature of the agreement does not eliminate the risk of tariffs being reinstated or increased—especially under President Trump’s unpredictable policy shifts.

Retailers like educational toy producer Viahart and small business owners such as Mississippi-based CEO Anna Buck are hedging their bets, rushing to import stock before the truce expires. Yet they acknowledge the precariousness of relying on temporary policy relief. The current 30% tariff remains a significant burden for many small to mid-sized firms, undermining profitability and raising fears about rising consumer costs during key shopping seasons like back-to-school and Christmas.

Economic analysts, including KPMG’s Diane Swonk and CSIS’s Matthew Luck, caution that without a permanent agreement, consumer prices may rise, and long-term investment decisions will remain suspended. The possibility of another policy reversal has left many businesses in a “wait-and-see” mode.

Ripple Effects: Global Trade Partners React

The temporary easing of tensions between Washington and Beijing has immediate implications for other nations engaged in or awaiting trade negotiations with the U.S.

The European Union, for instance, while welcoming the reduced tensions, remains frustrated by the continued high level of U.S. tariffs on Chinese goods. EU Trade Commissioner Valdis Dombrovskis warned that such distortions could damage the global trading system. Meanwhile, the EU has not ruled out retaliatory tariffs if discussions with the U.S. fail to yield progress.

Japan, which has laid groundwork for trade talks with Washington, is concerned that its leverage may weaken now that U.S.–China tensions have cooled. Japanese officials fear a tougher negotiating stance from the U.S. and worry that opportunities to extract concessions might dwindle as the spotlight shifts back to bilateral demands.

India has escalated its response by lodging a formal complaint with the World Trade Organization over U.S. tariffs on its steel and aluminum exports. In a notable shift, India is preparing retaliatory duties and Trade Minister Piyush Goyal has embarked on direct negotiations in the U.S.—signaling a firmer, rule-based posture toward American protectionism.

Truce or Tactical Pause?

Although the U.S.–China tariff pause has temporarily smoothed trade flows and stabilized trans-Pacific logistics, it is far from a resolution. The economic implications for global partners are complex and dynamic. As firms leverage this temporary window to rebuild inventories, the underlying fragility of the trade environment remains.

Whether this truce evolves into a durable framework or simply postpones another round of escalations will hinge on the credibility of U.S. trade strategy, the alignment of global partners, and the willingness of both Washington and Beijing to anchor their actions in long-term mutual interest.

Source: Nikkei Asia

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Stocks

Market Rebounds Amid Lingering Global Uncertainty

Asian markets opened on a firmer footing despite a turbulent global backdrop. Moody’s recent downgrade of the U.S. sovereign credit rating, attributed to the country’s growing $36 trillion debt burden, initially roiled Treasuries but was largely brushed aside in Tuesday’s Asian session. Yields on 30-year U.S. bonds retreated slightly from an 18-month peak, calming investor nerves and lending support to risk assets across the Asia-Pacific.

The MSCI Asia-Pacific ex-Japan Index rose 0.36%, hovering near last week’s seven-month high, while Japan’s Nikkei climbed 0.65% in early trade. Chinese mainland stocks held steady following fresh monetary policy easing, and Hong Kong’s Hang Seng Index rallied 1%.

China’s Rate Cuts Add Momentum to Regional Sentiment

Investor sentiment in China was buoyed by the People’s Bank of China’s decision to reduce both the one-year and five-year loan prime rates by 10 basis points, the first such move since October 2024. In tandem, major state-owned banks cut deposit rates by up to 25 basis points, signaling a broad-based effort to ease financial conditions and stimulate credit demand.

This policy shift helped stabilize the CSI300 Index, which ticked up 0.15%, and added upward pressure to Hong Kong equities. The monetary moves underscore Beijing’s concern about lackluster domestic consumption and weak property market trends, even as it navigates ongoing friction with Washington over trade.

Investors Weigh Trade Stalemate and U.S. Fiscal Outlook

Despite the temporary truce on tariffs announced earlier this month, there has been no major progress in finalizing new trade deals. Analysts warn that without clear breakthroughs, markets may lack directional conviction. According to Saxo Bank’s Charu Chanana, the resilience of U.S. corporates and economic data may currently offset debt concerns, but investor patience could wear thin if policy clarity does not improve.

U.S. equities closed flat on Monday, and the U.S. dollar drifted lower as Treasury yields steadied. The Federal Reserve continues to adopt a cautious tone, with Vice Chair Philip Jefferson emphasizing a wait-and-see approach. Meanwhile, the debate over Trump’s proposed extension of the 2017 tax cuts—legislation that could add $3–5 trillion to the national debt—is intensifying. Markets are watching closely ahead of the House vote expected later this week.

Traders have already scaled back expectations of Federal Reserve rate cuts in 2025, from four in April to two currently, as markets digest the Fed’s caution and the inflationary risk from expansionary fiscal policies and erratic trade measures.

Broader Impacts: RBA, Commodities, and Currency Volatility

The Australian dollar weakened slightly to $0.64485 ahead of a policy decision from the Reserve Bank of Australia, with markets broadly expecting a rate cut. If delivered, it would further align Australia with global trends toward looser monetary policy, particularly as growth projections soften.

Commodities showed mixed performance. Oil prices were volatile as geopolitical tensions flared over U.S.-Iran nuclear negotiations. Investors are concerned that faltering talks may delay the reintroduction of Iranian oil supply into global markets, potentially exerting upward pressure on crude prices in the medium term.

Calm Amid Uncertainty, But for How Long?

Markets in Asia appear to be entering a tentative phase of stability following major shocks in U.S. fiscal policy and Chinese trade dynamics. However, with no concrete trade agreements yet secured and ongoing fiscal expansion in Washington raising long-term concerns, global investors may soon demand higher premiums for risk. The next inflection point will hinge on progress—or lack thereof—in both trade negotiations and domestic policy debates in the U.S., setting the tone for risk appetite heading into the second half of 2025.

Source: Reuters

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Economic

PBOC Launches Coordinated Monetary Easing Effort

On May 20, the People’s Bank of China (PBOC) implemented a long-anticipated monetary easing policy, cutting the one-year loan prime rate (LPR) by 10 basis points to 3.0% and the five-year LPR to 3.5%. These reductions come alongside synchronized cuts in deposit rates by China’s largest state-owned banks, including ICBC, Bank of China, and China Construction Bank, marking a broad effort to reduce borrowing costs while safeguarding bank profit margins.

The one-year LPR governs most new and outstanding loans, while the five-year rate primarily affects mortgage costs. Taken together, the adjustments aim to inject momentum into sluggish credit demand, encourage consumer spending, and revive sectors like housing and small business lending.

Deposit Rate Reductions Signal Deepening Policy Commitment

Alongside lending rate cuts, state banks also reduced deposit interest rates by 5 to 25 basis points across various tenors. The one-year time deposit rate now sits at 0.95%, while three- and five-year deposit rates were lowered by 25 basis points.

These reductions signal Beijing’s intent to give banks more room to lower loan rates without hurting margins. By guiding smaller banks to follow suit, the PBOC is effectively reshaping the country’s interest rate structure from both sides of the balance sheet, aiming to reignite borrowing without destabilizing the banking system.

Trade Truce Offers Temporary Relief But Not Structural Fix

This round of easing comes in the wake of a 90-day truce between China and the United States on tariffs. Announced earlier this month in Geneva, the agreement temporarily lowers U.S. tariffs on Chinese goods from 145% to 30%, while China reciprocated by reducing its duties from 125% to 10%. While the pause offers near-term relief, it does not eliminate the long-term drag of trade uncertainty on China’s investment climate.

Some analysts argue that the de-escalation reduces immediate pressure on Beijing to launch large-scale stimulus. Nomura’s chief China economist Ting Lu warned, however, that without “sizable stimulus and structural reforms,” hitting the government’s “around 5%” growth target will remain elusive.

Economic Data Signals Patchy Recovery

Recent macroeconomic indicators show China’s recovery remains uneven. April’s home price index showed no month-on-month growth, continuing a nearly two-year stagnation in the housing market, despite repeated attempts by policymakers to stabilize it. Similarly, new bank loans dropped more than expected in April, indicating continued weak demand for credit.

While global investment banks have marginally revised upward their growth forecasts following the tariff truce, the underlying structural problems—consumer caution, weak private investment, and overcapacity in real estate—remain largely unaddressed.

China’s latest rate cuts represent a tactical move to ease financial conditions and buy time amid economic headwinds and geopolitical uncertainty. However, with only modest policy adjustments so far, and the risk of prolonged global trade disruption still lingering, Beijing faces a narrowing path to achieving its 2025 growth goals. Without deeper reforms or bolder fiscal initiatives, these incremental monetary actions may offer limited relief in what continues to be a fragile post-pandemic recovery.

Source: Reuters

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Stocks

A Blockbuster Debut Amid Shifting Global Sentiment

Contemporary Amperex Technology Co. Ltd. (CATL), the world’s leading electric vehicle battery manufacturer, launched its long-anticipated Hong Kong listing on a high note, with shares opening at HK$296—well above the HK$263 issue price. The company raised $4.6 billion, making it the largest global IPO of 2025 to date, and a potential green shoe option could lift proceeds to $5.3 billion.

This successful debut underscores a robust appetite for Chinese technology and green energy equities, especially amid signs of easing trade tensions. CATL’s dual listing, which supplements its existing Shenzhen presence, is strategically aligned with its ambitions to cement a dominant role in global EV supply chains.

Investor Demand Surges Despite Geopolitical Risks

The listing was massively oversubscribed, with the institutional tranche covered 15.2 times and the retail portion a staggering 151 times, as disclosed in CATL’s filings. Despite prior concerns that U.S. institutional investors might be restricted from direct participation, many gained exposure through offshore accounts.

The strong order book was bolstered by the timing of a U.S.-China trade truce. The temporary agreement—reducing U.S. tariffs on Chinese goods from 145% to 30%, and China’s tariffs on U.S. imports from 125% to 10%—was announced just one day after CATL opened its bookbuild. The de-escalation appeared to spur long-only global investors who had initially abstained from bidding to enter the market late.

Strategic Expansion Fuels Investor Optimism

CATL plans to allocate a significant portion of its IPO proceeds toward building a new battery plant in Hungary, as part of its expansion into the European EV supply chain. This aligns with supply agreements already in place with global automakers including BMW, Stellantis, and Volkswagen.

The company’s net profit for Q1 2025 rose 32.9% year-on-year to 14 billion yuan ($1.91 billion), marking its fastest earnings growth in nearly two years. Meanwhile, it expanded its global market share in the EV battery sector to 38% in 2024, up from 36% a year earlier, according to SNE Research. This expansion reflects both technological leadership and operational scalability.

CATL Founder and Chairman Robin Zeng positioned the listing as a milestone toward deeper capital market integration and a broader push toward a global low-carbon economy.

Broader Implications for China’s Capital Markets

The success of CATL’s Hong Kong IPO is more than a corporate win—it signals a renewed window of opportunity for Chinese companies seeking global capital amid complex geopolitical dynamics. Investor appetite appears resilient, even as regulatory and trade-related headwinds persist.

CATL’s performance also revitalizes Hong Kong’s IPO landscape, which has seen diminished activity amid rising U.S.-China tensions and domestic economic headwinds. This listing follows a similar-sized 2024 debut by Midea Group, but it is the largest since Kuaishou Technology’s $6.2 billion raise in 2021.

A Vote of Confidence for Chinese Innovation

CATL’s successful Hong Kong debut reflects growing investor confidence in China’s high-tech and green sectors, even as trade tensions remain unresolved. With strategic global expansion plans and surging profitability, the battery leader’s IPO marks not only a significant capital market milestone but also a broader endorsement of China’s evolving role in the global clean energy transition. As U.S.-China tariff negotiations continue, CATL’s listing offers a clear signal: investors are betting that the future of EVs—and the capital markets supporting them—will be increasingly transnational.

Source: Reuters

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Daily News

[Quick Facts]

1. Following two phone calls, Zelenskyy outlined three key demands to the U.S., expressing willingness to sign a peace memorandum with Russia

2. Moody's downgrades major bank deposits after downgrading U.S. rating

3. UK and Europe reach a number of agreements in areas such as fisheries and trade

4. Jefferson: central bank policy is in a very good position to wait and see patiently

5. Williams: Fed can be patient for new data

6. BOJ will hold meeting with market participants to seek views on pace of tapering bond purchases

7. India is reportedly negotiating a three-stage trade deal with the U.S.

8. Muller: ECB must be cautious about further rate cuts

9. U.S. Conference Board's Leading Economic Index slips in April

[News Details]

Following two phone calls, Zelenskyy outlined three key demands to the U.S., expressing willingness to sign a peace memorandum with Russia

On the 19th, local time, during a briefing following his call with U.S. President Trump, Ukrainian President Zelenskyy stated that in their first conversation, he emphasized three critical demands: a ceasefire must be implemented, sanctions against Russia must be enforced, and the U.S. should "not make any decisions regarding matters related to Ukraine without Ukraine's participation."

Zelenskyy stated that Ukraine's position would be determined upon receiving a proposal from Russia. Trump informed him that the U.S. and Russia had discussed a memorandum within the bilateral framework, which could serve as the basis for a subsequent ceasefire, ultimately leading to a peace treaty. This memorandum, jointly supported by both countries, would include ceasefire terms. Zelenskyy indicated that Russia and Ukraine could, as suggested by Russian President Putin, initially sign a memorandum, followed by an agreement to end the full-scale conflict.

Zelenskyy stated that the specifics of the proposed memorandum from Russia remain unclear. He indicated that Ukraine would determine its position upon receiving Russia's proposals regarding the memorandum.

Regarding potential diplomatic efforts, Zelenskyy mentioned that Ukraine is considering a joint conference involving the U.S., Ukraine, Russia, and the European Union. The conference could potentially be held in Turkey, the Vatican, or Switzerland.

Furthermore, Zelenskyy indicated that the EU would impose a comprehensive sanctions package against Russia if a ceasefire is not implemented. He expressed that he was not discouraged by the U.S.' lack of more stringent sanctions against Russia, emphasizing the importance of maintaining focus. Zelenskyy expressed confidence in the EU's forthcoming robust sanctions and their implementation timeline.

Reportedly, Zelenskyy held two calls with Trump on the 19th. Initially, they had a one-on-one conversation, followed by a joint call where Zelenskyy, Trump, and leaders from the European Commission, France, Italy, Germany, and Finland participated.

Moody's downgrades major bank deposits after downgrading U.S. rating

Moody's downgraded the deposit ratings of several major banks, including Bank of America and JPMorgan Chase, citing the U.S. downgrade last Friday and diminished government support capabilities. Moody's lowered the long-term deposit ratings of subsidiaries of Bank of America, JPMorgan Chase, and Wells Fargo by one notch to Aa2, the third-highest level.

Additionally, Moody's downgraded the senior unsecured debt ratings of some Bank of America and Bank of New York Mellon subsidiaries from Aa1 to Aa2. Furthermore, Moody's lowered the long-term counterparty risk ratings of some subsidiaries of Bank of America, Bank of New York Mellon, JPMorgan Chase, State Street, and Wells Fargo by one notch to Aa2. This represents the latest instance of a cascading effect triggered by Moody's sovereign credit rating downgrade. Moody's removed the U.S.'s top credit rating, lowering it one notch to Aa1, and attributed the expanding budget deficit to successive administrations and Congress, noting little sign of alleviation.

UK and Europe reach a number of agreements in areas such as fisheries and trade

On the 19th, the Prime Minister's Office announced that the UK and the EU have reached agreements in several areas, including fisheries and trade, which are projected to boost the UK's economy by nearly £9 billion (approximately US$1.34 per pound) by 2040. Prime Minister Starmer met with EU leaders in London. Following the meeting, the UK and the EU signed a new 12-year fisheries agreement, ensuring continued access for the UK fishing vessels to EU waters while maintaining existing quotas for EU vessels in UK waters. The UK government will invest £360 million in modernizing fishing vessels and upgrading technological equipment. Furthermore, the sanitary and phytosanitary agreement will streamline UK food exports and reduce costs, benefiting the UK businesses.

Downing Street stated that since Brexit, UK exports to the EU have decreased by 21%, and imports have fallen by 7%. This agreement will facilitate the re-entry of UK products, such as burgers and sausages, into the EU market. In environmental matters, the UK and the EU agreed to link their carbon emissions trading systems to "avoid businesses being affected by the EU's carbon tax, which is due to be implemented next year." UK steel exports will benefit from a "tailored" agreement to circumvent new EU regulations and tariffs, which is expected to save UK steel manufacturers approximately £25 million annually.

The agreement stipulates that the UK and the EU will initiate a "Youth Mobility Scheme." According to a statement from the Prime Minister's Office, this scheme will establish quotas and set duration limits for the movement of people, with specific regulations expected to mirror the agreements between the UK and countries such as Australia and New Zealand. The agreement will prioritize UK-EU cooperation in combating illegal immigration, including "establishing a returns mechanism and jointly addressing the issue of English Channel crossings."

Jefferson: central bank policy is in a very good position to wait and see patiently

Federal Reserve Vice Chairman Jefferson stated on Monday that the central bank must ensure that any price increases resulting from policy adjustments do not lead to sustained inflationary pressures. U.S. President Donald Trump has imposed comprehensive new tariffs on numerous U.S. trading partners while proposing and implementing other immigration and regulatory policy reforms. Economists generally anticipate that changes in trade policy will exert upward pressure on inflation and restrain economic growth, although the ultimate magnitude of the tariffs and their potential economic impact remain highly uncertain. "I think it's important that monetary policy must ensure that any increase in prices does not translate into persistent inflation," Jefferson said on Monday at the Federal Reserve Bank of Atlanta's 2025 Financial Markets Conference in Fernandina Beach, Florida. Jefferson indicated that the Fed's policy stance is in a "very good position" and is "moderately restrictive" for the economy.

Williams: Fed can be patient for new data

Williams stated on Monday that uncertainty complicates matters for policymakers, businesses, and households, as they assess the impact of the Trump administration's policies, including tariffs, on the U.S. economy. The Federal Reserve can afford to await new data.

While inflation is decreasing, and the economy is nearing full employment, the Fed is closely monitoring loan defaults and consumer spending. Current monetary policy is "slightly restrictive" and in a "good position." It is unlikely that clarity will be achieved in June or July. The process will involve continuous data collection, gradual clarification of the situation, and observation of developing trends.

BOJ will hold meeting with market participants to seek views on pace of tapering bond purchases

The Bank of Japan (BOJ) will consult market participants this week to gauge their perspectives on the pace of quantitative tightening. The BOJ will hold two meetings on Tuesday with representatives from banks and securities firms to gather their views on the current and future reduction of its bond holdings. A third meeting with buy-side groups will take place on Wednesday. The feedback will inform the BOJ's assessment of its bond-buying program at its next policy meeting on June 16-17. These discussions are part of the BOJ's efforts to unwind its ultra-accommodative monetary policy and normalize the bond market. A decade of large-scale asset purchases has resulted in the BOJ holding over half of outstanding Japanese government bonds and a significant portion of exchange-traded funds.

India is reportedly negotiating a three-stage trade deal with the U.S.

According to informed sources in New Delhi, India is in discussions with the U.S. regarding a three-stage trade agreement. A preliminary agreement is anticipated before July, coinciding with the expiration of the reciprocal tariffs imposed by the Trump administration. This interim agreement may encompass market access for industrial goods, certain agricultural products, and address non-tariff barriers such as quality control requirements. Negotiations are ongoing, and it remains uncertain whether the Trump administration will consent to a three-stage trade agreement.

Muller: ECB must be cautious about further rate cuts

ECB Governing Council member Muller stated on Monday that the ECB cannot rule out further reductions in borrowing costs, but must proceed cautiously, as there is no clear need to proactively support economic growth. "For me, the starting point is that interest rates are already low enough not to hinder our economic recovery," Muller (Governor for Eesti Pank) said in an interview in Tallinn on Monday. While further monetary easing may be justifiable, "I don't see a clear reason for us to cut rates significantly."

U.S. Conference Board's Leading Economic Index slips in April

According to the U.S. Conference Board, the U.S. Leading Economic Index (LEI) declined in April. The LEI decreased by 1% month-over-month to 99.4, falling short of economists' expectations and marking the largest drop in two years. Justyna Zabinska-La Monica, an analyst at the Conference Board, noted, "Consumer expectations have become increasingly pessimistic each month since January 2025, and the contributions from building permits and average manufacturing workweek turned negative in April. There is also widespread weakness when observing the six-month trends of the LEI's components, which is a warning sign for growth." (The LEI, a composite of ten components including new orders for manufacturers, initial jobless claims, new private housing building permits, stock prices, and consumer expectations, is designed to signal shifts in the business cycle.)

[Today's Focus]

UTC+8 12:30 Reserve Bank of Australia (RBA) May Interest Rate Decision

UTC+8 13:30 RBA Governor Bullock holds a press conference on monetary policy

UTC+8 14:00 Germany April PPI MoM

UTC+8 14:55 ECB Governing Council member Wunsch speaks

UTC+8 16:00 Bank of England Chief Economist Pill speaks

UTC+8 18:00 ECB Governing Council member Knot speaks on financial stability

UTC+8 20:30 Canada April CPI MoM

Pending G7 Finance Ministers and Central Bank Governors Meeting until May 22

Risk Warnings and Disclaimers

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China–U.S. Trade War

Economic

Tariff Pressure Drives Surge in Illicit Trade Practices

Chinese exporters are offering U.S. businesses deceptively attractive deals by absorbing all tariff costs under “delivered-duty-paid” terms. However, legal experts warn that behind many of these offers lies a growing web of customs fraud. Exporters are inflating compliance claims while systematically under-declaring shipment values and misclassifying products to minimize duties.

This strategy enables them to maintain near pre-tariff prices despite levies reaching up to 55%. In some cases, goods are routed through shell companies acting as “importers of record,” which vanish after defaulting on tariff payments—often covered initially by mandatory $50,000 customs bonds. Once bonds are exhausted, these entities dissolve and reemerge under new names, perpetuating the cycle.

A Known Scheme Gains Scale Amid New Tariff Wave

While underreporting value is not new, the practice has gained momentum since Trump’s second-term tariff hike. Legal and customs experts say a flood of freight-forwarding ads on Chinese platforms like Xiaohongshu openly offer “all-tax-inclusive” shipments, underscoring the normalization of illicit tactics. Furniture, electronics, and appliances are among the most common categories involved.

Industry insiders, including Guangzhou-based Imex Sourcing Services, confirm that U.S. buyers are increasingly encouraging Chinese suppliers to employ these evasive strategies. A Guangdong electronics manufacturer told CNBC anonymously that U.S. pressure to avoid tariffs is now routine in client conversations.

Legal Exposure for U.S. Firms: Ignorance Not a Defense

U.S. companies benefiting from underpriced imports, knowingly or not, face significant legal exposure. Dan Harris, a Seattle-based attorney specializing in trade law, stressed that being outside the importer-of-record designation does not protect businesses from liability under U.S. customs law and the False Claims Act.

He noted that many of his clients have seen shipments seized or received unexpected customs bills after foreign suppliers failed to pay duties. “There’s no way a company paying $20 suddenly pays only $25 after tariffs unless something is off,” he said, calling out firms using plausible deniability as a shield. He urged importers to demand full customs documentation from overseas partners.

The DOJ has now prioritized customs fraud for investigation and prosecution. Attorney Matthew Galeotti confirmed last week that tariff evasion will become a primary focus area going forward, potentially implicating U.S. firms that are complicit, even passively.

Undercutting Lawful Businesses and Market Fairness

The fraudulent pricing advantages granted by these schemes are putting legitimate businesses at a disadvantage. Cze-Chao Tam, CEO of Trinity International, noted that her U.S.-based company, which sources ethically from China and Southeast Asia, cannot fully pass rising tariffs on to buyers, leading to margin compression. “Consumers will always pick the cheaper option, even if it’s driven by illegality,” she said.

The problem is structural. Legal operators face intense price pressure, particularly in competitive sectors like home goods, as rivals quietly leverage fraudulent supply chains.

Enforcement Gaps and U.S. Customs Constraints

U.S. Customs and Border Protection (CBP) is facing its most aggressive enforcement test yet. With only a fraction of incoming cargo inspected, experts like Alex Capri, a former U.S. customs official, warn that current systems lack the scale to handle the volume. He argues that improved pre-departure enforcement is critical and should involve foreign governments in origin verification.

Illicit transshipment through third countries further complicates enforcement. A Goldman Sachs report estimated $110–130 billion in tariff evasion occurred in 2023 alone, with under-invoicing and mislabeling each contributing about $40 billion.

CBP spokespersons claim that current operations involve a combination of advanced technology and legal enforcement. Following Trump’s recent actions, the agency is applying “the most severe penalties permitted by law.”

A Cracking Facade of Global Trade Compliance

The proliferation of fraudulent tactics in U.S.-China trade underlines a broader unraveling of trust in the global supply chain system. While the Trump administration touts rising tariff revenue—$16.3 billion collected in April alone—the reality is that widespread evasion is bleeding billions from the system and exposing businesses to unforeseen legal consequences.

As the U.S. intensifies enforcement, companies must weigh the short-term gains of “sweet deals” against the long-term risks of complicity in customs fraud. The illusion of duty-free imports in a high-tariff era is quickly giving way to a regulatory crackdown that few firms are prepared to withstand.

Source: CNBC

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Economic

Targeted Rate Cuts Signal Monetary Policy Shift

On May 20, the People’s Bank of China (PBOC) announced a 10-basis-point cut to its key lending benchmarks, reducing the one-year Loan Prime Rate (LPR) to 3.0% from 3.1%, and the five-year LPR to 3.5% from 3.6%. These are the first adjustments since October 2024, and they follow earlier announcements this month of broader monetary easing and liquidity injections.

The LPR serves as the de facto benchmark for new lending in China. The one-year rate affects most corporate loans, while the five-year LPR is closely tied to mortgage pricing and long-term consumer credit. By trimming both rates, authorities are seeking to stimulate borrowing in both the corporate and residential sectors, with the five-year cut signaling specific concern about the stagnant property market.

Trade War Fallout Forces Policy Response

This round of monetary easing comes as China faces intensifying external shocks, particularly from escalating tariffs imposed by the Trump administration. The trade war has disrupted exports, suppressed private sector confidence, and led to renewed volatility in China’s manufacturing and financial sectors.

Beijing’s strategy—combining rate cuts with targeted liquidity support—is aimed at cushioning these headwinds without resorting to aggressive fiscal spending. The rate reduction is also part of a wider policy toolkit that includes regulatory adjustments and fiscal incentives to stabilize growth.

Although the U.S. and China reached a temporary truce earlier this month, the underlying geopolitical tension has not been resolved, and Chinese policymakers appear to be preparing for prolonged uncertainty.

Mortgage Relief and Housing Market Implications

The reduction of the five-year LPR is particularly notable as it affects mortgage rates, signaling a targeted attempt to shore up the real estate sector. Housing activity remains sluggish in many cities despite previous interventions, and weak demand for new housing has constrained broader economic recovery.

Lower mortgage costs could help revive homebuyer sentiment, especially in smaller cities where affordability concerns are highest. However, without a more decisive rebound in consumer confidence and job creation, the housing market’s recovery may remain uneven.

Economic Outlook and Limitations of Monetary Tools

While the LPR cut is a step toward easing credit conditions, it remains a relatively modest move. Analysts note that the effectiveness of monetary policy may be limited if consumer and business sentiment does not improve. Structural challenges—including high youth unemployment, local government debt burdens, and global supply chain reconfiguration—continue to weigh on the economy.

Moreover, the PBOC has to carefully balance stimulus with financial stability. Excessive credit easing could stoke asset bubbles or undermine efforts to manage long-term debt risks.

China’s decision to lower key lending rates reflects a shift toward more proactive monetary policy amid deepening trade tensions and weakening domestic demand. While the cuts aim to lower borrowing costs and stabilize key sectors such as housing and manufacturing, the broader success of these measures will depend on restoring consumer confidence, maintaining financial stability, and navigating the geopolitical pressures that continue to challenge China's economic trajectory.

Source: Reuters

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Data

Temporary Truce Between the U.S. and China Boosts Imports but Leaves Global Uncertainty

U.S.–China Tariff Truce Ignites a Surge in Orders

Risk Management Takes Center Stage as Uncertainty Looms

Ripple Effects: Global Trade Partners React

Truce or Tactical Pause?

Source: Nikkei Asia

Asian Markets Gain as Traders Digest U.S. Debt Concerns and Trade Policy Signals

Market Rebounds Amid Lingering Global Uncertainty

China’s Rate Cuts Add Momentum to Regional Sentiment

Investors Weigh Trade Stalemate and U.S. Fiscal Outlook

Broader Impacts: RBA, Commodities, and Currency Volatility

Calm Amid Uncertainty, But for How Long?

Source: Reuters

China Cuts Key Lending and Deposit Rates as Trade Tensions Linger and Growth Wobbles

PBOC Launches Coordinated Monetary Easing Effort

Deposit Rate Reductions Signal Deepening Policy Commitment

Trade Truce Offers Temporary Relief But Not Structural Fix

Economic Data Signals Patchy Recovery

Source: Reuters

CATL Soars in $4.6 Billion Hong Kong Debut Amid Renewed Global Investor Optimism

A Blockbuster Debut Amid Shifting Global Sentiment

Investor Demand Surges Despite Geopolitical Risks

Strategic Expansion Fuels Investor Optimism

Broader Implications for China’s Capital Markets

A Vote of Confidence for Chinese Innovation

Source: Reuters

May 20th Financial News

[Quick Facts]

[News Details]

[Today's Focus]

Hidden Costs Behind "Sweet Deals": Chinese Exporters Use Fraud Tactics to Evade U.S. Tariffs

Tariff Pressure Drives Surge in Illicit Trade Practices

A Known Scheme Gains Scale Amid New Tariff Wave

Legal Exposure for U.S. Firms: Ignorance Not a Defense

Undercutting Lawful Businesses and Market Fairness

Enforcement Gaps and U.S. Customs Constraints

A Cracking Facade of Global Trade Compliance

Source: CNBC

China Cuts Lending Rates to Bolster Economy Amid Trade Pressures and Weak Demand

Targeted Rate Cuts Signal Monetary Policy Shift

Trade War Fallout Forces Policy Response

Mortgage Relief and Housing Market Implications

Economic Outlook and Limitations of Monetary Tools

Source: Reuters

Risk Disclosure