China’s factories take a big blow as Trump’s tariffs bite

By John Liu, CNN

Hong Kong (CNN) — China’s factory activity contracted at its fastest pace in 16 months in April, as steep US tariffs took a heavy toll on the manufacturing sector, adding urgency to Beijing’s efforts to roll out fresh economic stimulus.

The manufacturing Purchasing Managers’ Index (PMI) fell to 49.0 in April, the weakest reading since December 2023, according to data released by the National Bureau of Statistics (NBS) on Wednesday. A reading below 50 signals a contraction.

Zhao Qinghe, a senior statistician at the NBS, said in a statement that the contraction in factory activity was due to “sharp changes in the external environment and other factors.”

The acute decline underscores the damage that US President Donald Trump’s 145% tariffs on Chinese goods have already inflicted on the country’s export and manufacturing-reliant economy. Chinese manufacturers began to feel the brunt of the sky-high levies last month, as order cancellations and production cuts spread, raising fresh concerns over the country’s growth prospects.

The April data marks a setback for Beijing, as top leaders strive to maintain a defiant and confident posture amid Trump’s trade war. The Chinese economy was already struggling with weak domestic consumption and a protracted property crisis.

While activity in China’s services and construction sectors showed marginal expansion, with non-manufacturing PMI hitting the 50.4 level, the April data points to a downturn. A parallel measure of new export orders also dived to 44.7, the lowest since late 2022 when the country was still grappling with the Covid-19 pandemic.

Robin Xing, chief China economist at Morgan Stanley, wrote in a Wednesday research note that the decline in PMI shows the impact of tariffs, which has led to weakening external demand.

“We believe the tariff impact will be the most acute this quarter, as many exporters have halted their production and shipments to the US, given heightened tariff uncertainties,” the report said. “The overall policy framework remains reactive and supply-centric, insufficient to offset tariff shocks.”

Analysts expect the Chinese government to intensify fiscal and monetary stimulus in the coming months to boost growth.

In response to the economic challenges, Beijing has begun rolling out modest measures since late last year, including easier access to credit for struggling firms and steps to boost domestic consumption.

But officials have so far stopped short of aggressive nationwide stimulus. Instead, Beijing has pledged targeted support to drive consumption and alleviate pressure on exporters and hinted at additional measures to be unveiled in the next few months.

At a government press conference on Monday, Zhao Chenxin, the vice chairman of the National Development and Reform Commission, China’s state planner, said Beijing had “ample policy reserves” to respond to economic needs and will accelerate the implementation of measures already laid out.

On the same day, Chinese Foreign Minister Wang Yi dismissed calls for a negotiated tariff truce with Washington, saying appeasement in the face of US threats will only “embolden the bully.” His comments on the sidelines of a meeting in Rio de Janeiro echoed the message in a striking social media video shared by his ministry calling on the international community to stand up to America’s “bully” leader.

In an interview that aired on Tuesday, Trump said China “deserved” the 145% tariffs that he imposed, claiming Beijing would absorb them.

“China probably will eat those tariffs. But at 145, they basically can’t do much business with the United States,” he said in an interview with ABC News.

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