- Trump's tariff threats against China could just be a negotiating strategy.
- A China-US trade deal could trigger a powerful rebound in Chinese stocks.
- What are the best US-listed Chinese stocks to buy if this scenario unfolds?
- Looking for more actionable trade ideas? Subscribe here for 50% off InvestingPro!
Donald Trump’s tough talk on tariffs has often made waves, but when it comes to action, his follow-through seems more restrained than his fiery rhetoric.
Despite concerns that his hardline stance on China could disrupt global trade, Trump has yet to deliver on the sweeping tariff increases he once touted.
While he recently floated the idea of a 10% tariff on Chinese goods starting in February, this proposal is far less aggressive than the 60% tariff threats that punctuated his campaign speeches.
The measured approach suggests Trump understands the potential consequences for the U.S. economy and stock market, particularly as S&P 500 companies pulled in over $100 billion in revenues from China in 2024.
For investors navigating the uncertain terrain of U.S.-China trade relations, positioning your portfolio strategically is critical.
And for that, InvestingPro tools can prove useful. As of now, you can subscribe at a 50% discount amid the New Year's extended sale using this link.
Trump's threats against China: just a negotiating tactic?
Trump's threats of tariffs against China could ultimately serve above all as a starting point for negotiating a trade deal.
This is all the more true given recent signs of President Trump's willingness to engage in dialogue with President Xi. In particular, Trump invited Xi to his inauguration.
As state visits require months of preparation, Xi did not attend but was represented by Vice-President Han Zheng.
In addition, following the failure of the first attempt by the House of Representatives to pass a budget, the second version incorporated modifications requested by Trump and Elon Musk, to remove provisions strengthening restrictions on investment in China.
Finally, President Trump has asked that the Supreme Court's decision on TikTok be postponed and has also filed an amicus brief with the Court in defense of Bytedance.
It should be noted, however, that this issue extends beyond China due to the involvement of donors and the participation of numerous American investors in the Bytedance parent company.
While Chinese equities have been battered in recent months due to fears over US tariffs, a China-US trade deal seems possible with Trump back in power, and this would undoubtedly trigger a massive rebound.
This is all the more true given that investors worldwide appear to be largely underexposed to non-US equities, particularly Chinese equities.
Apart from a potential trade agreement with the USA, the Chinese government has begun to gradually stimulate its economy, which could also give a boost to Chinese equities.
What's more, China's risk-free rate is at an all-time low, while dividend yields are rising, making equities more attractive than bonds - the opposite of what's happening on US markets.
Which are the best Chinese stocks to take advantage of a possible rebound?
Against this backdrop, the question arises as to which Chinese stocks are the best to buy to profit from a potential rebound. To find out, we looked at several large Chinese companies whose shares are traded in the USA: Alibaba (NYSE:BABA), Baidu Inc (NASDAQ:BIDU), Tencent (OTC:TCEHY), Yum! Brands Inc (NYSE:YUM) and JD.com (NASDAQ:JD).
We began by assembling these stocks into an InvestingPro Watchlist, to get a glance at these stocks' potential according to analysts and InvestingPro Fair Value, as well as their health score.
Note: InvestingPro Fair Value calculates an intelligent synthesis of recognized valuation models for each stock on the market, while the Health Score is based on several key financial metrics to assess a company's level of financial strength.
Source: InvestingPro
Each of the 5 stocks studied shows solid upside potential, according to both analysts and InvestingPro Fair Value. In particular, Alibaba, JD.com, and Baidu have a bullish potential of over 50%. What's more, the health scores of all the companies on this list are also very solid.
Conclusion
Several large Chinese companies listed in the US therefore appear to be highly undervalued at present, while at the same time displaying solid financial profiles, which in itself already justifies interest in buying them.
However, if we add to this the possibility that Trump's threatened tariffs could lead to a trade agreement rather than a trade war, it suggests that Chinese equities could be among the best opportunities of 2025.
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Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of assets in any way, nor does it constitute a solicitation, offer, recommendation or suggestion to invest. I would like to remind you that all assets are evaluated from multiple perspectives and are highly risky, so any investment decision and the associated risk belongs to the investor. We also do not provide any investment advisory services.