China, Hong Kong stocks dip as US tariffs loom; NPC in focus

SHANGHAI/SINGAPORE (Reuters) - China and Hong Kong stocks slipped on Tuesday, as new U.S. tariffs on Chinese imports were set to take effect, while investors awaited the upcoming annual parliamentary sessions to gauge Beijing’s policy path.

China’s blue-chip CSI300 Index edged down 0.3% by the midday break and the Shanghai Composite Index traded roughly flat. Hong Kong’s benchmark Hang Seng eased 0.5%.

U.S. President Donald Trump reaffirmed on Monday that he would increase tariffs on all Chinese imports to 20% from the previous 10% levy to punish Beijing for failing to halt shipments of fentanyl to the U.S. The tariffs were expected to take effect at 0501 GMT on Tuesday.

The cumulative 20% duty also comes on top of tariffs of up to 25% imposed by Trump during his first term on some $370 billion worth of U.S. imports.

"What would be interesting to see is the response by China itself ... because so far the stance has been quite restrained in response to the 10% tariff put on last month," said Moh Siong Sim, a currency strategist at Bank of Singapore.

Sim was referring to China’s relatively modest retaliatory tariffs and the yuan’s stability which the authorities have maintained through the daily official fixing. But he cautioned that this approach might shift with the implementation of additional tariffs.

China’s Commerce Ministry vowed on Tuesday to retaliate against the fresh tariffs, reiterating its stance that the Trump administration was trying to "shift the blame" and "bully" Beijing over fentanyl flows.

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China’s defence and gold-related shares rose around 3% and 2%, respectively, while agriculture stocks edged down.

The new tariffs coincide with the start of China’s National People’s Congress (NPC) on Wednesday, where Beijing is expected to roll out its 2025 economic priorities.

Beijing was expected to maintain its economic growth target at roughly 5% and announce a budget deficit of 4% of GDP.

Eva Lee, head of Greater China Equities at UBS Global Wealth Management, said that before the latest tariffs were announced, expectations for the NPC meeting were not high.

"Now they announced the 10% and then swiftly implemented that, so that might put more ... you can say pressure on the China side to do more at the NPC meeting," Lee said.

Shares of Chinese electric vehicle maker BYD (SZ:002594) slumped nearly 4% after the company said it had raised $5.59 billion in a primary share sale at a discount to its Monday closing price.

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