China Apr manufacturing activity shrinks on US tariffs pressure

SINGAPORE (ICIS)–China’s manufacturing activity shrank in April as export orders weakened amid the intensifying trade war with the US, official data showed on Wednesday.

• New orders, production indexes down from March
• Caixin PMI down to 50.4 in April from 51.2 in March
• 2% of China’s GDP directly affected by US tariffs – Nomura

The official purchasing managers’ index (PMI) dropped to 49.0 in April, down from the March reading of 50.5, which was the highest in 12 months, data from the National Bureau of Statistics (NBS) showed.

A PMI reading above 50 indicates expansion in the manufacturing sector, while a reading below 50 signals contraction.

Reciprocal trade tensions escalated in April as punishing US tariffs of up to 145% on many Chinese goods took effect, prompting Beijing to retaliate with fresh duties of up to 125% on imports from the US.

China’s exports soared over 12% in March as businesses rushed out shipments to front-run the implementation of steep tariffs.

Production and demand slightly declined compared to the previous month, indicating a slowdown in both manufacturing and new orders, according to the NBS.

The new order index dipped to 49.2%, down 2.6 percentage points from March, while the production index went down to 49.8%, slowing by 2.8 percentage points from the previous month.

Key sectors, including equipment manufacturing, high-tech manufacturing and consumer goods, declined in April.

The non-manufacturing PMI was down to 50.4% in April from 50.8% in the prior month, and the composite PMI stood at a higher 51.4 in March as compared to February’s 51.1.

Separately, the monthly PMI figure by private news outlet Caixin fell to a low of 50.4 in April from 51.2 in March, the lowest reading since January.

Caixin’s manufacturing PMI survey focuses on smaller, export-oriented companies, with a greater emphasis on private sector firms.

“A renewed fall in new export orders … often attributed to the impact of tariffs, led to a slower and only marginal rise in total new work. As a result, production growth likewise eased on the month,” Caixin said.

As business optimism fell, firms also lowered inventory levels, while job cuts also resumed amid reduced capacity pressures, Caixin added.

Both supply and demand grew at a slower clip despite continued market improvements, while new export orders declined at the fastest rate since July 2023 due to US tariffs of 145%, said Wang Zhe, a senior economist at Caixin Insight Group.

“The impact of the tariffs on the supply side, however, was relatively limited. Manufacturers continued to absorb existing orders, keeping the gauge measuring output in expansionary territory for the 18th consecutive month,” Wang said.

A cloudy market outlook is resulting in subdued business and consumer confidence are subdued, making it harder to boost domestic demand.

“The ripple effects of the ongoing China-US tariff standoff will gradually be felt in the second and third quarters. As such, policymakers should be well prepared, with action taken sooner rather than later,” Wang said.

Despite the deepening trade conflict, the path to de-escalation through dialogue remains unclear.

While some reports have surfaced suggesting potential negotiations or a tiered approach to tariff reduction from the US side, conflicting statements from US officials and denials from Beijing indicate that formal, substantive trade talks are not currently underway.

TARIFFS TO DAMPEN GROWTH
“Assuming a 50% loss of exports to the US, China might lose ~1.1% of GDP directly in the near term. The actual loss will surely be larger as the shock ripples through to other sectors, especially the services sectors that facilitate merchandise exports,” said Japan-based Nomura Global Markets Research in a note on 28 April.

“The US and China could reach a deal, but the timing, scale, and content of such a deal during this game of chicken is very uncertain, as political leaders resist being the first to blink.”

Chinese foreign ministry spokesperson Guo Jiakun said on 29 April that the tariff war “was initiated by the US”, adding that the US “should seek dialogue based on equality, respect and mutual benefits” and cease its threats and pressures.

He was responding to US Treasury Secretary Scott Bessent saying on 28 April that he believed “it’s up to China to de-escalate, because they sell five times more to us than we sell to them”.

Thumbnail image shows Qingdao port in Shandong province (Source: Costfoto/NurPhoto/Shutterstock)

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Focus article by Jonathan Yee