By Graham Summers, MBA | Chief Market Strategist
China just “blinked” in the trade war.
When President Trump announced “Liberation Day” on April 2nd 2025, the media teemed with analysis and editorials from various gurus that it was a colossal mistake, that China was in a position of strategic strength compared to the U.S., that this position of strength would mean that China wouldn’t need a deal, and that the U.S. would ultimately lose the trade war.
All of this is now proving to be incorrect.
China’s economy is teetering on the brink of collapse, with factories closing daily.
China’s factory activity contracted at the fastest pace in 16 months in April, a factory survey showed on Wednesday, keeping alive calls for further stimulus as Donald Trump’s “Liberation Day” package of tariffs snapped two months of recovery.
Source: Reuters.
Youth unemployment is skyrocketing with reports indicating that the “official” numbers out of China, as bad as they are, actually DOWNPLAY the situation.
Joblessness among youth in Chinese cities rose a second month in February, tracking the nation’s jobless rate which reached a two-year high, official data showed on Thursday.
The urban jobless rate for 16-to-24-year-olds, excluding students, grew to 16.9% from 16.1% in January, according to data from the National Bureau of Statistics.
Source: Reuters
China’s stock market has not been immune to the situation either. The mainstream media in the West has been quick to point out how bad the trade war has been for U.S. stocks, but the situation has been as bad if not worse in China.
By the look of things, China has hit its “breaking point.”
Late last week, the People’s Republic made two MASSIVE gestures to the U.S. They were:
- Exempting a quarter of U.S. imports from tariffs for the first time in years.
- Asking the Trump administration what it wants China to do regarding its involvement in the U.S.’s fentanyl crisis.
The message here is clear: China wants a deal.
Yes, there will be a lot of back and forth… and an actual trade deal will likely take months to accomplish, but a deal is coming.
This changes everything as far the financial system is concerned.
Stocks discount the future. With China signaling that it is interested in making a deal, the future, at least economically speaking, is better today than it was a month ago… which means that THE lows are likely in for stocks.
This is not to say stocks will go straight up from here. But it DOES indicate that the worst is quite possibly behind us as far as the markets are concerned for the next few months.
And while the markets as a whole should work their way higher, certain stocks are poised for truly EXTRAORDINARY gains based on this unique environment.
We’ve outlined three of them in our Special Investment Report How to Profit From Inflation.
Normally this report is only available to our paying clients, but in light of what’s happening in the markets today, we are making just 99 copies available to the general public.
To pick up one of the remaining copies…
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research
