Stock prices soared today on a better-than-expected April US employment report and news that China is evaluating US overtures to start trade negotiations. In the Chinese zodiac, 2025 is the Year of the Snake. It began on January 29, 2025. It is shaping up to be a bad year for China's economy.
We've been thinking that the Chinese are less likely to blink than President Donald Trump in his trade war with China. He has blinked, but he hasn't reduced the 145% tariff on Chinese imports. What he has done is to repeatedly state confidence in reaching a trade agreement with China. In April 2025, he told reporters that the US was in talks with China and expected a "very good" deal within three to four weeks, claiming that Chinese officials, including President Xi Jinping, had reached out multiple times. He described China as eager to negotiate due to the pressure of US tariffs, saying, "They have to make a deal—because otherwise, they’re not gonna be able to deal in the United States."
Trump has claimed to have gotten a call from Chinese President Xi Jinping and to be in active discussions with him. But Chinese officials have denied any such talks, dismissing these claims by President Trump and his administration as "groundless" or "fake news." This suggests that Trump's statements may be aimed at calming financial markets or projecting strength.
However, the Chinese may be changing their tune. That's probably because Trump's trade war is starting to hurt their economy. Consider the following indicators:
(1) The Chinese Consumer Confidence Index remained very depressed in March around the post-Covid lows (chart).
