Impact of US Tariffs: China’s Manufacturing Activity Declines – What It Means for the Global Market

China’s manufacturing activity faced a significant setback in April, marking the steepest decline since December 2023, as revealed by an official survey. The manufacturing purchasing managers’ index (PMI) fell to 49. This number indicates contraction, as any figure above 50 usually points to growth.

This drop comes amid escalating tensions in the ongoing trade war with the U.S. Tariffs have surged, disrupting trade between the two largest economies. A spokesperson from China’s National Bureau of Statistics emphasized that the contraction reflects a combination of a high base of comparison and external pressures.

The organization noted, “No one wins in trade wars,” highlighting how similar pressures have been seen in other major economies. After experiencing growth in February and March, hopes for a recovery looked promising. However, reliance on exports for growth has struggled against the backdrop of slow domestic consumption.

Economists are adjusting their growth predictions for China, now the world’s second-largest economy. Challenges include a prolonged slowdown in the property sector, which is causing further strain. With a GDP growth target set at about 5% for 2025, experts from Oxford Economics have warned that the impact of tariffs could hinder this goal. They’ve lowered their growth forecast to 4.1% but believe China has more resilience than many perceive.

Recent estimates from Société Générale suggest that Chinese exports to the U.S. may plummet by 70%. This could correlate with a negative shock of about 2% to GDP. Meanwhile, Nomura anticipates a similar decline could result in approximately a 1.1% drop in GDP, leading to substantial job losses.

In addition to manufacturing, China’s non-manufacturing sector also saw some growth, though it slowed to 50.4 compared to 50.8 the previous month. Tariffs on exported Chinese goods have now reached 145%, though some exemptions have been made for electronic items. Beijing has responded with exemptions on certain imports as well.

Zichun Huang, a China economist at Capital Economics, pointed out that the sharp PMI drop might overstate the true impact of tariffs due to negative sentiment effects. However, it still underscores the growing pressures on China’s economy as external demand weakens.

As global markets evolve, keeping an eye on trade dynamics will be vital. Monitoring these trends will not only highlight economic health but also showcase the interconnectedness of global economies.

For a deeper understanding of the ongoing trade situation, you can explore studies from the American Chamber of Commerce in China that delve into tariffs and their effects on both economies.



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