China’s soft patch isn’t over, tariff relief won’t fix a structural stall

China just dodged a 145% tariff sledgehammer, but don’t mistake that for an economic pivot. The markets may have ripped higher on the headline, but the real story isn’t about what was avoided—it’s about what still remains broken. Tariffs might be rolled back for now, but the Chinese economy is still slogging through a deep structural slowdown masked by short-term relief and headline theatrics.

Sure, the rollback stopped the bleeding. GDP forecasts got bumped from 4.2% to 4.4%. Great. But under the hood, the engine’s still sputtering. Property prices are still falling in tier-one cities, the consumer is tapped out, and migrant workers—the backbone of China’s labor force—are stuck in a toxic cocktail of underemployment and wage compression. The official urban unemployment rate might say 5.2%, but if you believe that reflects the reality on the ground, I’ve got some Evergrande bonds to sell you.

Even with the new deal, U.S. tariffs on Chinese goods are still sitting close to 40%, up from just 10% pre-Trump. The 90-day window on this “deal” is a Band-Aid, not a cure. There’s no long-term framework, no institutional trust, and no incentive for manufacturers to roll out new investment cycles when trade terms could snap back before the next quarter’s earnings call.

Fixed asset investment looked strong in Q1, but don’t expect that to hold. The capex cycle is fragile, and business confidence isn’t built on temporary tariff suspensions. Meanwhile, Beijing’s throwing another 1–1.5% of GDP into fiscal stimulus, but it’s just plugging leaks, not driving new growth. CPI fell 0.1% in April, and core inflation’s barely breathing at 0.5% y/y. PPI for consumer goods? Down 1.4%. That’s not a reflationary rebound—that’s a disinflationary warning shot.

The housing market, once the piggy bank of China’s middle class, is now a deflationary drag. Existing home prices continue to slide, and the wealth effect has flipped—consumers feel poorer, not richer, and they’re spending accordingly. Retail momentum is stagnant, and stimulus isn't translating into demand. That’s the real story.

So let’s call it straight: this isn’t a recovery. It’s a delayed reckoning. The tariff pause helps sentiment, but China is still fighting a multi-front battle—housing, jobs, demand, and now soft export growth in a fractured global trading system. The yield curve isn’t signaling revival. It’s bracing for more deflation, more policy patchwork, and more volatility down the road.

Trade the tariff relief if you want, but size your stops tight and don’t drink the Kool-Aid. This is still a structurally impaired economy looking for a new growth model—and the clock’s ticking.