The United States is considering a major rollback of tariffs on Chinese imports, with plans underway to cut the current 145% levy to as low as 50%, according to a report by the New York Post.

The potential move signals a significant shift in the Trump administration’s trade strategy as high-level negotiations between US and Chinese officials are expected to resume in Switzerland next week.

Sources familiar with the matter told The Post that US officials are actively discussing reducing the steep tariffs imposed on Chinese goods to a range between 50% and 54%.

The aim is to ease trade tensions and open the door to a broader agreement between the two economic superpowers.

At the same time, tariffs on imports from other South and Southeast Asian countries could be lowered to around 25%, a step seen as part of a wider recalibration of American trade policy in the Indo-Pacific region.

“They are going to be bringing it down to 50% while the negotiations are ongoing,” one source was quoted as saying by the Post.

The push to reduce tariffs follows President Donald Trump’s recent comments in the Oval Office, where he unveiled a US-UK trade deal and acknowledged that China tariffs “can only come down.”

“It’s at 145%, so we know it’s coming down,” Trump told reporters, adding optimism about improving trade relations with Beijing.

The expected tariff adjustment aligns with comments from Treasury Secretary Scott Bessent, who earlier this week remarked at the Milken Institute Global Conference that the current triple-digit tariffs were “not sustainable.”

The administration’s internal discussions reportedly gained momentum following a White House meeting in April with top US retail CEOs — Doug McMillon (Walmart), Brian Cornell (Target), and Ted Decker (Home Depot) — who described the talks as “constructive.”

Retailers are already preparing for possible changes.

Jay Foreman, CEO of toymaker Basic Fun (maker of Care Bears, Tonka Trucks, and My Little Pony), told The Post that buyers are asking vendors to price goods based on various potential tariff rates, ranging from 10% to 54%.

“The signals we are getting is that the dam will break by the end of this week or next,” Foreman said.

Although White House spokesperson Kush Desai stated that official tariff decisions will come directly from the President and dismissed speculation, market watchers and industry insiders remain optimistic that a deal is in the works.

“People are realizing that deals are going to be made,” a source said.

The development could have a broad impact on global trade flows, consumer prices, and inflation — especially in the retail and manufacturing sectors that rely heavily on Chinese and Southeast Asian imports.

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The US dollar appeared set to close the week with gains against most of its major counterparts on Friday, as a newly announced trade agreement between the United States and the United Kingdom fanned hopes for potential progress in the highly anticipated US-China trade negotiations scheduled for the weekend.

Simultaneously, diminishing expectations for imminent US interest rate cuts, following cautious remarks from the Federal Reserve, provided further support for the greenback.

Financial markets headed into the weekend with all eyes firmly fixed on the upcoming trade talks between Washington and Beijing, slated to begin Saturday in Switzerland.

The euro remained steady during Asian trading hours but was down approximately 0.6% for the week at $1.1217.

The Japanese yen also weakened against the dollar by about 0.7% over the week, touching a one-month low of 146.18 before stabilizing around 145.78.

Sterling, which had initially rallied on reports of an impending US-UK trade deal, relinquished those gains after the specifics of the agreement revealed a relatively limited scope.

The deal modestly expands agricultural access for both nations and lowers some prohibitive US duties on British car exports, but notably leaves the 10% baseline tariff in place.

The pound subsequently hit a three-week low of $1.3220 in early Friday trading.

Market analysts interpreted the dollar’s strength as a reflection of cautious optimism regarding broader trade resolutions.

“The market reaction of buying USD may reflect greater optimism that such tariff deals are doable,” noted Steve Englander, global head of G10 currency research at Standard Chartered, in a client note.

He added, “Trump’s dangling of the prospect of a trade détente with China may be adding to optimism that the global disruption from trade wars may not be as severe as markets have feared… For the time being, G10 markets would be relieved if US and China bilateral tariffs were rolled back, even if they remain well above January 19 levels.”

Reflecting a refreshed, albeit selective, appetite for risk, Bitcoin also saw a notable surge, pushing back above the $100,000 mark.

Focus on US-China dialogue

President Trump, while announcing the UK deal, stated he expects “substantive negotiations” between the US and China this weekend and indicated that the current high tariffs on Beijing (reportedly up to 145%) would likely be reduced.

Adding to the speculative buzz, the New York Post reported, citing unidentified sources, that the administration is considering a plan to slash tariffs on Chinese imports by more than half, though the White House dismissed this as mere speculation.

Central bank divergence and Fed’s cautious stance

Central bank actions this week were largely in line with expectations.

The Bank of England proceeded with an anticipated rate cut, while central banks in Sweden, Norway, and the United States opted to keep their policy rates on hold.

However, comments from Federal Reserve Chair Jerome Powell, particularly his emphasis on the prevailing level of economic uncertainty, significantly tempered market expectations for near-term US rate cuts.

Consequently, market pricing for a Fed rate cut in June has receded sharply, falling to around 17% from approximately 55% just a week ago.

This recalibration of Fed expectations has been a key factor underpinning the dollar’s recent strength.

Asian currency dynamics and other market moves

In contrast to its performance against G10 peers, the dollar registered declines against several Asian currencies this week, largely influenced by a surprising surge in the Taiwan dollar, which settled around 30 to the dollar after a volatile period, marking a gain of over 6% since the end of April.

The Singapore dollar also traded near decade highs.

The Hong Kong dollar, however, retreated from the strong end of its trading band following significant intervention by the Hong Kong Monetary Authority.

The Australian dollar was on track for its first weekly drop in a month, down 0.7% to $0.6391, with the New Zealand dollar also trading lower at $0.5892.

As the week draws to a close, the focus remains squarely on the high-stakes trade discussions in Switzerland, which have the potential to significantly shape market direction in the coming weeks.

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The intensifying tensions between nuclear powers India and Pakistan pose a significant risk of widespread and severe humanitarian consequences for the region.

Escalating tensions highlight the critical need for emergency preparedness in the energy sector. A protracted conflict would significantly threaten both nations’ capacity to satisfy their energy demands, according to Rystad Energy.

The Indian army reported that Pakistan’s armed forces initiated “multiple attacks” involving drones and other munitions across India’s entire western border on Thursday night and early Friday, escalating the conflict between the two nuclear-armed nations.

Energy security

There is a significant disparity between India and Pakistan’s strategic petroleum reserves. 

In terms of daily crude demand, India consumes 5.40 million barrels per day (bpd) compared to Pakistan’s 0.25 million bpd, according to Rystad Energy analysis.

India maintains a strategic petroleum reserve of 39 million barrels, with 21.4 million barrels currently in stock. Pakistan, conversely, does not possess any strategic oil reserves, which could expose the country to supply vulnerabilities.

India’s commercial stockpiles are close to 160 million barrels.

“However, the discrepancy goes beyond just demand—India’s strategic and commercial reserves can sustain supply for over a month (33 days), while Pakistan, which lacks any strategic reserves, has only 20 days’ worth in stock,” Rohan Goindi, senior analyst, commodities markets, oil at Rystad Energy said in an emailed commentary.

India, the world’s third-largest crude importer, depends heavily on foreign sources for its oil needs, with approximately 85% of its demand met through imports. 

Similarly, Pakistan imports around 78% of the crude oil required to meet its domestic demand.

Fortunately, refineries in both India and Pakistan are situated outside the conflict zone, mitigating the risk of operational disruptions, Rystad said. 

Additionally, the lack of refineries and LNG terminals in the affected areas suggests that crude oil and LNG imports are unlikely to be directly impacted.

However, a notable difference exists in the level of emergency preparedness between the two nations, which raises concerns, the Norway-based energy intelligence company said.

Water treaty suspension

India has intensified pressure beyond military action through significant diplomatic and infrastructure moves. 

These include suspending the Indus Waters Treaty, expelling Pakistani diplomats, and accelerating five hydroelectric projects in Jammu & Kashmir with over 4,000 MW capacity. 

The hydroelectric projects, previously hindered by treaty-related issues, can now proceed more quickly due to the suspension of procedural obstacles. 

The potential suspension of a long-standing water-sharing treaty poses a significant threat to Pakistan’s energy sector, as 90% of its installed hydropower capacity relies on this agreement, according to Rystad.

The Indus Water Treaty is crucial for both India and Pakistan. 

India has 2.7 GW of hydropower projects relying on rivers covered by the water treaty, which is part of its total installed hydropower capacity of 52 GW nationwide.

Disruption to these projects will have a relatively small impact in India as hydropower only contributed 8% to total power generation in 2024.

However, disruption to the water treaty could put up to 9.3 GW of hydropower capacity–equivalent to 90% of Pakistan’s total installed hydropower capacity–at risk, as per Rystad’s analysis.

Uttamarani Pati, analyst, renewables & power research at Rystad Energy said;

If the treaty were to be terminated altogether, India would gain full control of the Indus, Jhelum and Chenab rivers, enabling it to build more hydropower projects and potentially operate existing upstream facilities in ways that could adversely affect its downstream neighbor.

Suspension of water treaty more severe for Pakistan

According to Rystad, the suspension of the Indus Water Treaty will have a more severe impact on Pakistan than for India. 

“Reduced inflow from the Indus and Jhelum rivers will compromise Pakistan’s grid stability and ability to meet peak power demand, especially in the summer months, potentially leading to widespread blackouts.”

Terminating the Indus Waters Treaty (IWT) would allow India to control the Indus, Jhelum, and Chenab rivers, potentially enabling the construction of additional hydropower projects in the area, it further said.

India’s current upstream hydropower operations carry a potential risk of negatively affecting its downstream neighbor. 

This could occur through actions such as sediment flushing and unexpected releases of large volumes of reservoir water, which could lead to flooding.

Rystad noted:

However, no steps have been taken in this direction at present, and any international backlash from such unilateral actions could be significant.

In addition, escalating tensions threaten long-term green energy investments like Pakistan’s Thatta hydrogen project and could disrupt mature projects such as AM Green Ammonia’s Kakinada plant in India due to economic instability and supply chain issues.

Also, in anticipation of supply shocks, India could ramp up purchases of crude oil, which is likely to support prices in the short term.  

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Following the implementation of steep tariffs on solar panel exports from Southeast Asian nations like Cambodia and Thailand, Chinese-owned manufacturers in Laos and Indonesia increased their share of the US market, according to a Reuters report.

In April, the US government finalised significant tariffs on solar cell and module imports from Vietnam, Malaysia, Thailand, and Cambodia. 

This action, following two earlier tariff implementations in June and November of the previous year, aims to counter dumping by predominantly Chinese-owned factories operating in these nations.

Tariff impact on Southeast Asian solar exports

According to the report, some Chinese companies have shifted their production to Indonesia and Laos, subsequently increasing their exports to the United States.

Following the late November imposition of the second round of US duties on nearby producers, the combined market share of Indonesia and Laos in the US solar modules market significantly increased to 29% in the subsequent three months. 

This represents a substantial rise from their combined share of less than 1% in 2023, according to a Reuters analysis of US trade data.

Chinese companies established manufacturing in Southeast Asia primarily to evade tariffs and sell to the US at higher prices than the global average, according to analysts and industry experts. 

This highlights the limitations of US trade interventions.

According to Yana Hryshko of Wood Mackenzie, the imposition of high tariffs will likely cause a significant reduction or complete shutdown of all solar manufacturing capacity in the four affected Southeast Asian nations.

Exports and imports

Following the initial tariffs in June, solar panel exports from Vietnam, Malaysia, Thailand, and Cambodia to the US decreased by 33% year-over-year over the subsequent nine months. 

During this same period, trade data indicates that exports from neighboring Indonesia and Laos saw an approximate eight-fold increase.

Following the implementation of the second round of tariffs in late November, the combined market share of four unnamed countries in US solar panel imports decreased from 82% in the full year of 2024 to 54% in the subsequent three months. 

Overall, US solar panel imports have declined by 26% since June.

Despite increased import costs from targeted nations due to the initial tariffs, US imports of solar cells, used for panel assembly in the country, have tripled.

Simultaneously, exports from Indonesia and Laos significantly expanded, increasing approximately 17 times and gaining market share.

Data indicated a substantial shift in US solar import composition following the initial implementation of tariffs. 

Solar cells’ contribution to overall US solar imports has dramatically increased to approximately 28% since the tariffs were introduced. 

This contrasts sharply with their much smaller share of 6.5% in 2023, highlighting a notable change in import patterns within the solar energy sector in the United States.

Market adjustments

Rystad Energy analyst Fei Chen stated that Chinese manufacturers are already adjusting their export strategies because of potential tariffs on Indonesia and Laos.

She said:

Several solar manufacturers plan to set up production bases in non-Southeast Asia regions such as Turkiye, Oman, Saudi Arabia, UAE, Ethiopia, to supply the US market.

Driven by high US import duties that have largely excluded them for over a decade, Chinese factories are increasing solar panel sales to markets in Asia and Africa, according to data from the energy think-tank Ember.

Chinese exports saw a significant shift in the first quarter of 2025, with Asia becoming the top destination, absorbing 37% (an increase from 25.4% in 2024). 

Concurrently, Europe’s share of Chinese exports decreased to 34% from 41% in 2024, according to Ember data.

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Indian equity markets opened sharply lower on Friday, weighed down by investor concerns following a series of drone and missile attacks launched by Pakistan on the evening of May 8.

The benchmark BSE Sensex fell 765.80 points or 0.95% to 79,569.01, while the NSE Nifty50 Index dropped 245.20 points or 1.01% to 24,028.60 by 10:45 AM.

The sell-off came despite a continued flow of foreign institutional investments into the Indian equity market.

Analysts noted that the sudden rise in geopolitical tensions had injected short-term uncertainty into otherwise strong domestic and global fundamentals.

Defence ministry confirms drone, missile strikes along western border

According to the Ministry of Defence, Pakistan Armed Forces targeted military installations using drones and other munitions along the Western border and carried out multiple ceasefire violations (CFVs) along the Line of Control in Jammu and Kashmir.

Key military stations including Jammu, Pathankot, and Udhampur came under attack from Pakistani-origin drones and missiles.

However, all threats were neutralised without any casualties or material loss, with the Indian response deploying both kinetic and non-kinetic countermeasures in line with standard operating procedures.

However, it has marked a significant escalation in tensions between the two nations.

Broader markets reel, but defence stocks gain ground

Across the board, sectoral indices were under pressure.

Nifty Bank, FMCG, Media, Metal, and Realty indices declined by 1–2%.

Mid and small-cap indices were not spared either, with the Nifty Midcap100 falling 1% and the Smallcap100 shedding 2%.

However, defence-related stocks saw sharp gains, driven by expectations of increased defence spending and faster order execution.

Shares of Bharat Electronics surged 3.41%, Bharat Dynamics gained 3.31%, and Astra Microwave climbed 3.21%.

Other gainers included Hindustan Aeronautics (2.34%), Paras Defence (2.08%), and Mazagon Dock Shipbuilders (1.56%).

“The attack has drawn attention to the defence sector’s strategic importance. With large order books already in place, these companies could benefit from accelerated execution timelines,” said Dr. Vikas Gupta, CEO of OmniScience Capital.

“That said, investors should remain cautious and invest based on valuation and scientific frameworks.”

Why market reaction is still subdued?

Despite the short-term decline, analysts remain optimistic about the broader outlook for Indian markets.

They pointed out that foreign institutional investors (FIIs) are continuing to invest in Indian equities, reflecting their sustained confidence in the country’s long-term economic growth prospects, even amid rising geopolitical tensions.

FIIs have poured in over Rs 47,000 crore ($5.5 billion) into Indian equities over the past 16 sessions.

This marks one of the longest buying streaks since December 2020 and underscores investor confidence in India’s long-term growth trajectory.

“Under normal circumstances, on a day like this, the market would have suffered deep cuts. But this is unlikely due to two reasons. One, the conflict, so far, has demonstrated India’s clear superiority in conventional warfare, and therefore, further escalation of the conflict will inflict huge damage to Pakistan. Two, the market is inherently resilient, supported by global and domestic macros. Weak dollar and potentially weakening US and Chinese economies are good for the Indian market,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Vijayakumar added that the domestic macros are further bolstered by high GDP growth expected this year, and the declining interest rate environment which is why FIIs are on a buying spree.

“Investors should not panic and exit from the market now. Remain invested, monitor the developments and wait for the dust to settle,” Vijayakumar added.

Technical outlook by analysts

On the technical front, analysts flagged a shift in short-term trend after the Nifty closed below its 5-day exponential moving average (EMA) placed at 24,340.

“Immediate resistance is seen between 24,340–24,500, while support lies in the 23,978–23,800 band,” said Devarsh Vakil, Head of Prime Research at HDFC Securities.

Rajesh Palviya, SVP – Technical and Derivatives Research, Axis Securities, said over the past three weeks, the Nifty 50 has been consolidating within the 24,000 to 24,600 range, suggesting a short-term sideways trend.

However, the index remains well above its 20-, 50-, 100-, and 200-day simple moving averages, which points to sustained bullish sentiment over the longer term.

“On the upside, the Nifty is likely to build on this strength and may advance toward the 24,800 to 25,000 levels. The key support area lies between 24,000 and 23,800, making any dip toward this zone a potential buying opportunity for traders. The weekly Relative Strength Index (RSI) remains in positive territory, indicating continued upward momentum.”

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