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(Bloomberg) — Chinese stocks fell in Hong Kong on Tuesday, as initial optimism from the tariff truce with the US gave way to concerns that Beijing would hold back on stimulus measures.

The Hang Seng China Enterprises Index ( ^HSCE ) dropped as much as 1.9% after climbing 3% in the previous session on optimism over thawing Sino-US tensions. The onshore benchmark CSI 300 ( 000300.SS ) Index pared early gains.

The retracement reflects worries that Chinese policymakers would have less incentive to push through higher fiscal spending or enact more stimulus, which are needed to address growth challenges, according to Sat Duhra, a portfolio manager at Janus Henderson Investors. It’s also a sign that investors are shifting their focus toward the material impact of still-higher US import duties, as well as uncertainties over further bilateral talks in the coming months.

“The uncertainty is no longer about what tariffs will be imposed, but about how these levels will hit earnings and economic momentum, especially heading into the third quarter,” said Charu Chanana, chief investment strategist at Saxo Markets. “So while sentiment has improved, the real test lies in how consumers and corporates respond to these new trade realities.”

The Hong Kong gauge’s latest decline means it has yet to recoup all the losses it has incurred from early April, when Trump announced his aggressive tariffs. It also has dented hopes to revive a world-beating rally in Chinese equities earlier this year.

The US said Monday it will slash duties on Chinese products to 30% from 145% for a 90-day period, while Beijing agreed to drop its levy on most goods to 10%.

Another factor weighing on sentiment is concern that the Trump administration would escalate tensions again. Previous episodes of him walking back agreements during the 2018 trade talks are reminders for investors to stay cautious.

“There is still uncertainty as to whether there will be any back and forth in the 90-day buffer period,” said Shen Meng, director at Beijing-based investment bank Chanson & Co.

Separately, the yuan climbed to a six-month high in both the onshore and offshore markets on Tuesday after the People’s Bank of China set the currency fixing stronger than the 7.2 per dollar level.

—With assistance from Iris Ouyang and Winnie Hsu.