By George Glover

Chinese stocks were dropping in early trading Monday -- and Beijing's retaliatory tariffs against the U.S. weren't the only factor putting investors in a sour mood.

American depositary receipts in the online retailer Alibaba Group fell 2.4%, Temu owner PDD Holdings slid 1.2%, and rival e-commerce name JD.com was down 1.8% ahead of the U.S. opening bell. Electric vehicle maker XPeng dropped 2.7%, and search-engine provider Baidu slipped 0.4%.

The selloff came after China's tariffs on U.S. farm products kicked in Monday. The tit-for-tat taxes, which are a response to the levies President Donald Trump imposed last month, could accelerate the pivot away from risk-on assets as trade tensions escalate.

Another factor driving the selloff in Chinese stocks was fresh data that showed Beijing's efforts to stave off deflation may not be working. Consumer prices fell for the first time in 13 months in February, the National Bureau of Statistics said Sunday.

The latest inflation reading is fueling fears that weak consumer spending could drag down earnings for the likes of Alibaba and PDD.

"Deflation continues to stalk the Chinese economy, with consumers super-cautious about spending," Hargreaves Lansdown's head of money and markets Susannah Streeter said. "The property crisis has battered wealth perceptions and led to risk averse behavior, with wariness rising amid the ratcheting up trade tensions and fresh tariffs being imposed by the U.S."

Despite those worries, Chinese stocks have outperformed their American peers this year, with investors betting that the world's second-largest economy will rebound and hopeful that the rise of start-up DeepSeek could trigger an artificial-intelligence investing boom.

The Nasdaq Golden Dragon China Index, which tracks U.S.-listed companies that do the majority of their business in China, is up 19% in 2025, compared with a 1.9% drop in the S&P 500 U.S. benchmark.

Write to George Glover at george.glover@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 10, 2025 06:47 ET (10:47 GMT)

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