China’s factories falter as Trump’s tariffs hammer export orders and manufacturing

China’s factories falter as Trump’s tariffs hammer export orders and manufacturing

China's factory sector has been hit hard by rising trade tensions with the US, with new figures indicating a sharp drop in export orders and factory production in April—the strongest indication yet that US President Donald Trump's sweeping tariffs are cutting into the second-largest economy in the world, the Wall Street Journal reported.

Based on figures published Wednesday by China's National Bureau of Statistics, the nation's official purchasing managers' index (PMI) fell to 49 in April from 50.5 in March. The reading below the 50-point level that distinguishes expansion from contraction means manufacturing activity is contracting for the first time since December 2023. It was the weakest showing in more than a year.

Even more troubling for Beijing, the new export orders sub-index fell to 44.7—the lowest level since December 2022 when China was still grappling with Covid-19 disruptions. This sharp drop indicates a steep erosion in worldwide demand for Chinese products as US tariffs start to bite, deterring American importers from ordering new goods and causing some to postpone or cancel shipments.

The slowdown follows Trump's tough new tariff policy, which has slapped high duties on a broad array of Chinese imports as part of a wider effort to rebalance the terms of trade between the two world superpowers. Although Beijing has officially condemned the tariffs as "economic bullying," the latest statistics indicate the economic harm is now starting to emerge.

For Chinese President Xi Jinping, the manufacturing downturn is another reason to increase pressure to accelerate domestic stimulus and walk a politically treacherous tightrope between economic stability and holding firm against Washington. Even initial hopes that China would ride out the tariff storm on the strength of internal demand and diversification are belied by the April data, which highlights the challenge of shielding its export-driven economy from external shocks.

The decline in exports also comes on the heels of a spate of shipments in the first quarter, when numerous Chinese exporters scrambled to send goods before Trump's new tariffs took hold. That frontloading might have concealed hidden weakness in earlier months, so April's precipitous drop is that much more jarring a sign of difficulty to come.

Beijing so far has little indication that it is preparing to soften its official stance. Officials remain insistent on economic self-reliance and toughness and blame the US for weaponising trade. Yet, with manufacturing now in decline and export orders crumbling, China's choices could be narrowing.

Trump, meanwhile, won't be dialling back the heat anytime soon. His government has praised the tariffs as a means of forcing supply chains back to the US and diminishing US reliance on Chinese production. With both sides hardening their positions, economists caution the chances of an imminent trade agreement are low.