Sector-Specific Opportunities in China Post-US Tariff Deal: Timing the GDP Growth Upside

The U.S.-China tariff truce, which slashed bilateral tariffs by over 70% in late April, has reignited optimism about China’s economic trajectory. With Goldman Sachs upgrading its 2025 GDP forecast to 4.6%—a 60-basis-point jump from earlier estimates—the stage is set for sector-specific outperformance. This isn’t just a macro tailwind; it’s a strategic moment to rotate capital into underfollowed industries poised to capture the “GDP upside” through export resilience, domestic stimulus, and valuation arbitrage.

The Catalyst: Tariff Reductions and Policy Support

The 90-day tariff truce—reducing U.S. levies to 30% from 145% and Chinese tariffs to 10% from 125%—has created a “suspension window” for businesses to recalibrate trade flows. Container booking data for May already shows a 277% spike in seven-day average volume (vs. early April), signaling front-loaded export activity. Meanwhile, Beijing’s stimulus measures—such as a 10-basis-point cut to the seven-day reverse repo rate (to 1.4%) and subsidies for auto/appliance purchases—are priming domestic demand.

Sector Rotation: Targeting Industrials and Tech Hardware

The tariff deal’s impact isn’t uniform. Industrials are the first beneficiaries. Companies with export exposure to the U.S. (e.g., machinery, auto parts) face reduced headwinds, while domestic infrastructure spending—linked to the Politburo’s April directive to stabilize growth—adds tailwinds.

Key Plays:
- Export Resilience: Look for industrials with U.S. exposure but also diversified markets (e.g., Southeast Asia). Forward P/E multiples here are 40% below tech peers, despite similar growth profiles.
- Infrastructure Plays: Firms tied to rail, construction equipment, or smart city projects could leverage policy stimulus.

Tech Hardware: Lower tariffs mean margin relief for firms like Foxconn (2317.TW) and TCL (000100.SZ), which supply U.S. consumer electronics. The sector’s valuation remains depressed, with average P/E multiples at 12x forward earnings, compared to 18x for software peers. Near-term catalysts include Q2 earnings, where export-linked firms could surprise to the upside.

Renewables: The Undervalued Green Play

China’s renewable energy sector—already a global leader—faces a dual tailwind: the tariff truce eases trade barriers for solar and wind equipment exports, while domestic subsidies for green infrastructure (e.g., offshore wind farms) are accelerating.

Why Now:
- Export Momentum: U.S.-bound solar panel shipments dropped 21% annually in April due to prior tariffs; the truce could reverse this.
- Valuation Discounts: Renewable firms trade at 15-20% below global peers despite China’s cost advantages and scale.

Near-Term Catalysts: Q2 Earnings and Policy Announcements

Investors should position ahead of Q2 earnings, where front-loaded exports and domestic stimulus could lift revenue growth. Key metrics to watch:
- Industrial output: April data showed 6.1% YoY growth; Goldman Sachs expects Q2 to hit 6.5% as factories ramp up ahead of the tariff window.
- Retail sales: The 5.1% April growth rate could rise to 5.8% in Q2 with stimulus-driven consumption.

Valuation Arbitrage: Buying Growth at a Discount

The key opportunity lies in valuation gaps between sectors. Industrials and renewables trade at historic lows relative to tech or consumer discretionary stocks, despite their exposure to the GDP upside. For example:

Sector	Forward P/E	2025E EPS Growth
Industrials	10x	12%
Tech Hardware	12x	15%
Renewables	14x	18%
Consumer Tech	18x	10%

This mispricing offers a chance to overweight undervalued sectors while avoiding overbought areas like luxury goods or real estate, which remain vulnerable to weak domestic demand.

Risks and the Case for Action

The tariff truce is temporary, and U.S.-China distrust could reignite. Structural issues—such as real estate sector slumps (fixed-asset investment fell 10.3% YTD in April)—still loom. However, the timing is now to capitalize on near-term momentum. The GDP upgrade reflects a “buy the rumor” environment; investors who wait for “confirmation” risk missing the rally.

Conclusion: Rotate Now to Capture the GDP Upside

The U.S.-China tariff deal has reset expectations for China’s economy. By rotating into undervalued industrials, tech hardware, and renewables—sectors with export resilience and domestic stimulus tailwinds—investors can position for a 4.6% GDP growth scenario. The valuation gaps are too wide to ignore: this is a call to act before the market fully prices in the upside.

The clock is ticking. The question isn’t whether to rotate—it’s why you’re not doing it already.