China’s factory activity slowed in April, with Beijing blaming “sharp changes” in the global economy as it fights a widening trade war with the US.
Punishing tariffs introduced by Donald Trump that reached 145% on many Chinese products came into force in April, and Beijing responded with 125% duties on imports from the US. Chinese exports soared more than 12% last month as businesses rushed to get ahead of the punishing tariffs.
The impact of the measures began to show in official data on Wednesday, with the purchasing managers’ index – a key measure of industrial output – falling to 49.0 in April, according to the National Bureau of Statistics, the lowest reading since December 2023. Anything below the 50-point mark signifies a contraction.
The reading for April represented a steeper decline than the 49.7 forecast in a Bloomberg survey. It was down from March’s 50.5, which was the highest figure in 12 months.
Zhao Qinghe, an NBS statistician, said the drop was largely down to “sharp changes in [China’s] external environment”.
Economists have warned that the disruption in trade between the tightly integrated US and Chinese economies could threaten businesses, increase prices for consumers and cause a global recession.
“The weak manufacturing PMI in April is driven by the trade war,” Zhiwei Zhang, the president and chief economist at Pinpoint Asset Management, wrote in a note. “The macro data in China and the US will weaken further … as the trade policy uncertainty delays business decisions.”
Goldman Sachs has estimated that 16m jobs in China could be at risk if the high tariffs persist, mainly in the export, wholesale and retail industries.
A new US measure to close a loophole that had allowed low-value goods to be shipped into the US for free comes into effect on Friday, which will mainly affect Chinese businesses.
More than 90% of packages arriving in the US come under the “de minimis” scheme, which allows items with a value under $800 (£599) to evade duties. From Friday, those goods, which have fuelled the rise of e-commerce companies such as Temu and Shein, will be subject to a 120% levy or a flat fee.
China’s economy, the world’s second largest, has struggled to fully recover since the Covid pandemic and is also grappling with sluggish domestic demand and a protracted property sector crisis.
“China’s economy is coming under pressure as external demand cools,” said Zichun Huang, a China economist at Capital Economics, in a note. “Although the government is stepping up fiscal support, this is unlikely to fully offset the drag, and we expect the economy to expand just 3.5% this year.”
Authorities last year announced a slew of aggressive stimulus measures aimed at boosting growth, including rate cuts and the easing of some home purchasing restrictions.
On top of this, leaders at a key political meeting vowed to create 12m urban jobs in 2025 in March.
after newsletter promotion
They also said they would aim for growth this year of 5% – the same as 2024 and a goal many economists view as ambitious.
Communist party leaders have pledged to support the companies and workers most affected by the US-China trade war.
China is also ratcheting up its propaganda war. On Tuesday, the Ministry of Foreign Affairs released a video entitled “Never kneel down!”, which accused the US of bullying China and other countries.
The International Monetary Fund, Goldman Sachs and UBS all recently revised down their economic growth forecasts for China over 2025 and into 2026, citing the impact of US tariffs. None of them expect the economy to hit Beijing’s official growth target.
The vice-chair of China’s state planner, Zhao Chenxin, said on Monday he was “fully confident” that it would achieve the 5% growth target for 2025.
The Chinese president, Xi Jinping, on Wednesday called for action to adapt to changes in the international environment and optimise its economic plans accordingly, the state-run Xinhua reported.
Xi made the remarks while chairing a symposium in Shanghai on economic and social development.
With Agence France-Presse and Reuters
