President Trump’s tariffs are already taking a toll on China’s factories.
Three weeks into a trade war that pushed import tariffs of Chinese-made goods to 145 percent, an official report on manufacturing activity signaled that in April, Chinese factories experienced the sharpest monthly slowdown in more than a year.
The report, a survey of industrial firms published on Wednesday by the National Bureau of Statistics, provides the first official indication of how the U.S. tariffs are affecting the Chinese economy. China has responded to the U.S. tariffs with 125 percent tariffs of its own on American goods.
The trade brinkmanship threatens U.S. and Chinese growth — and potentially the global economy. Emerging signs of hardship in both countries have ratcheted up pressure on President Trump and Xi Jinping, China’s top leader, to strike a deal to break the impasse.
Neither Beijing nor Washington appears ready to blink. China’s foreign ministry released a video on Tuesday, saying that the country refuses to cave to “a bully.” President Trump, in an interview with ABC News on Tuesday, continued to push back, saying China was “ripping us off like nobody’s ever ripped us off.” He said he believed that China “probably will eat those tariffs,” defying anxiety among consumers and businesses about the impact of the import taxes he has imposed.
On Tuesday, the shipping giant United Parcel Service announced it would cut 20,000 jobs and close 73 buildings this year. General Motors said it could no longer stand by its previous forecast for solid profit growth this year, citing Mr. Trump’s tariffs on imported cars and imported parts. U.S. consumer confidence fell to its lowest levels in five years.
China’s manufacturing purchasing managers’ index fell to 49.0 in April, down from 50.5 in March. A reading below 50 indicates a deterioration in activity in the sector. The index was above 50 in the previous two months, driven by a bump in orders ahead of the tariffs. The April figure was below what economists had expected.
The survey’s reading on new orders of goods for export was at its lowest levels since the Covid-19 pandemic, dragging down the overall index. Also, a gauge of manufacturing employment contracted to its lowest level since February 2024.
Zichun Huang, China economist at Capital Economics, said in a note to clients that the data “suggests that China’s economy is coming under pressure as external demand cools.” Steps the government is taking to pump money into the economy are “unlikely to fully offset the drag,” she said. Capital Economics forecasts the Chinese economy will grow 3.5 percent this year, which is well short of the government’s 5 percent growth target.
In a research report on Tuesday, Nomura Securities said that if Chinese exports to the United States were to drop 50 percent, 5.7 million people in China could lose their jobs immediately. That number could grow to 15.8 million workers once the long-term effects rippled through the economy.
Beijing has pledged to support its economy during the trade war with the United States, with a long list of initiatives aimed at encouraging its people to spend more. Among the ideas being proposed are pushing local governments to increase subsidies for those in need and improve pension benefits for retirees.
Chinese officials are hoping to stimulate domestic spending, which has remained stubbornly weak in the face of a property crisis that is weighing on the country’s economy. To offset that stagnation in consumption, the Chinese economy has relied even more heavily on exports.
On Wednesday, China passed a law aimed at preserving the rights of private companies. China’s focus in recent years on security and state control has come at the expense of the dynamism that helped propel China to become the world’s second-largest economy.
Private business owners have complained that their economic interests and rights are often overlooked in favor of government priorities and policies. At face value, this law aims to alleviate some of those concerns.
