Why iShares China Large-Cap ETF (FXI) Is Getting Hammered

The iShares China Large-Cap ETF FXI, which tracks 50 of China's largest companies listed in Hong Kong, is trading lower by 4.6% to $31.22 during Monday’s session after President Donald Trump last week declared a national emergency to impose sweeping tariffs under the International Emergency Economic Powers Act.

In response, China on Friday hit back with a 34% tariff on all U.S. imports and export controls on rare earth minerals, further intensifying the economic clash between the world's two largest economies.

FXI, whose holdings include major players like Alibaba Group Holding Ltd – ADR BABA and JD.Com Inc JD, was hit particularly hard as investors priced in expectations of slowed growth, supply chain disruptions and retaliatory headwinds for Chinese exports.

Trump's emergency declaration also introduced a blanket 10% import tariff on all goods entering the U.S., with additional reciprocal tariffs targeting trade partners with large surpluses—China being the largest at $270 billion.

Analysts warn that such aggressive moves could spark a global recession, and JPMorgan now sees a 60% probability of one hitting this year. With China labeled a target for "unfair trade practices," FXI is bearing the brunt of market fears that Beijing's tech and manufacturing champions could suffer amid reduced global demand and deteriorating diplomatic ties.

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