Chinese exporters may look to ‘gray’ trade chains...UBS lowers China GDP growth forecast...UK retail bosses raise concerns of Chinese ‘dumping’ risk

Chinese exporters may look to ‘gray’ trade chains

US President Donald Trump’s intensifying and unpredictable trade war against China could lead to a new boom in so-called gray trade chains as exporters seek to circumvent tariffs by routing their goods through third countries, reports Caixin. Although Trump announced on Wednesday a 90-day pause in the implementation of higher “reciprocal” levies on dozens of trade partners while maintaining the baseline 10% rate, he increased additional tariffs on Chinese imports to 125% in retaliation for Beijing’s decision earlier in the day to raise extra levies on US imports to 84% from the 34% rate announced on April 4. The new tariffs came on top of two separate 10% additional levies on Chinese imports imposed after Trump took office in January.

The 90-day pause is expected to spur demand for the rerouting of Chinese goods destined for the US via third-party countries that are subject to the lower 10% tariff rate during the reprieve, an employee working for an international freight forwarding company in Shanghai told Caixin.

“Washing and changing labels” on Chinese-made goods at ports could increase rapidly, he said, adding that Turkish traders have already inquired about the possibility of transshipping goods via ports in Turkey to the US. Turkey is currently subject to a 10% baseline tariff under Trump’s latest reciprocal tariffs strategy, although steel and aluminum exports have long been subject to a 25% tariff.

UBS lowers China GDP growth forecast

UBS has downgraded its China GDP growth forecast to 3.4% for 2025, on the assumption that tariff hikes between it and the United States will remain in place and that Beijing will roll out additional stimulus, it said in a report on Tuesday, reports Reuters. The Swiss investment bank's previous forecast for China's growth this year was 4%. It maintained its 2026 forecast at 3%.

The bank also expected China's exports to the US to fall by two-thirds in the coming quarters and overall Chinese exports to fall by 10% in US dollar terms in 2025, by also factoring in slower American and global economic growth.

"We think some of China's other trading partners may also raise tariffs on Chinese goods in the coming months, but likely only on specific products and not in similar magnitudes as the U.S. tariffs," it said.

UK retail bosses raise concerns of Chinese ‘dumping’ risk

British retail bosses have warned of an increased risk of Chinese products flooding the UK and Europe via platforms such as Temu, Shein and Amazon after US President Donald Trump’s punitive tariffs on the world’s second-largest economy, reports the Financial Times. The chief executives of electrical goods retailers, including Currys, have said Chinese factories selling directly to marketplaces or platforms will increasingly dump smaller goods destined for the US into Europe.

Currys chief executive Alex Baldock told the Financial Times there were early signs of “stock being diverted into European markets in a straightforward dumping way”.

He added: “The single biggest area where lots of stock is likely to land in the UK—at least in my world—is from the likes of Shein, Temu, Alibaba, TikTok shop, and most of all, Amazon marketplace, [which have a lot of Chinese vendors].”

China launches all-out efforts at consumption boost

China is scrambling to roll out more measures to boost consumer spending as it strives to offset the worst effects of an escalating trade war with the United States that threatens to rock its export sector, reports the South China Morning Post. The southern island of Hainan is holding a major consumption expo in an effort to attract high-spending foreign shoppers on Sunday, while local authorities across the country launch additional measures to encourage domestic consumers to open their wallets.

The China International Consumer Products Expo, the largest premium consumer goods exhibition in the Asia-Pacific region, opened on Sunday at a time when domestic consumption is becoming ever more crucial amid the intensifying global tariff war. The six-day event, billed as China’s only national-level expo dedicated to consumer products, also came as local governments offered more stimulus for consumer spending as a main strategy to shore up the slowing economy.

Chinese policymakers need to take further action to “strengthen people’s confidence and willingness to spend”, the state-owned media outlet Economic Daily said in a commentary on Monday.

Xpeng to use own AI chip for self-driving cars

Chinese electric vehicle (EV) maker Xpeng has ramped up development of its own artificial intelligence (AI) chip to power its semi-autonomous cars, with a first mass production model to be fitted with the Turing chip from as early as this quarter, reports the South China Morning Post. The chip, which is claimed to be more powerful than Nvidia’s Drive Orin X, would be used in all its production models as the EV maker promoted its cutting-edge technologies, CEO He Xiaopeng said in an interview. The chip could also power flying cars and robots being developed by its affiliated companies, he added.

“Our chips will be seen in our cars all over the world in future,” he told the Post in Hong Kong. “We hope traffic rules in Hong Kong and other overseas markets will allow our cars with autonomous driving systems to take to the streets sometime next year.” He did not disclose which EV model would start using its self-developed chip.

He, who is also the company’s founder, made the remarks ahead of Xpeng’s Global Brand Night event in Hong Kong on Tuesday, when the EV maker’s latest products and technologies, including drones and autonomous driving platform, will be displayed.

Going gray

The intensifying and unpredictable trade war could lead to a boom in so-called gray trade chains as exporters from China seek to circumvent tariffs by routing their goods through third countries. According to Caixin reports, the practice of “washing and changing labels” on Chinese-made goods at ports could increase rapidly and Turkish traders have already inquired about transshipping Chinese goods via ports in Turkey to the US.

How much of China’s $438 billion in exports to the US could realistically be replicated through transshipping or gray trade chains is up for debate, but it is unlikely to be more than 25%, which clearly isn’t enough to maintain China’s exports at a level that can support the ailing economy.

Choosing to target other markets is also a possibility, but there are already some trade barriers in place in many parts of the world and there is nowhere that can replicate the buying power of the US and the profit margins it once offered.