China is weighing a rollback of its harsh 125% retaliatory tariffs on select US imports, signaling a potential cooling in trade tensions. According to sources close to the matter, the exemptions could include essential products like medical equipment, ethane—a key feedstock for plastics—and aircraft lease payments. One Chinese airline has already been told its leasing fees may be spared, and regulators are now collecting customs codes from businesses across sectors, hinting at broader relief ahead.
The market reaction? Bullish. Asian equities climbed, the yuan erased earlier losses, and investor sentiment perked up. The move follows a similar step by the US earlier this month, when the Trump administration carved out key electronics—smartphones, laptops, memory chips—from its latest tariff list. These mirrored exemptions show just how interdependent the two economies still are. Beijing is also reportedly mulling tariff waivers on eight semiconductor-related items. That list doesn't include memory chips, which could be a setback for firms like Micron Technology (MU, Financial), but the direction of travel is what matters here.
Of course, no one's calling this a full-blown resolution. Chinese officials are still demanding the US lift all unilateral tariffs before formal talks resume. President Trump has reached out to Xi Jinping directly—so far with no response. Still, signs of backchannel pragmatism are emerging. According to the American Chamber of Commerce in China, some recent US shipments have already slipped through without being hit by new levies. The list of exemptions may still be fluid, but for now, markets are treating this as the clearest signal yet that the two sides might be ready to hit pause.
