China’s Manufacturing Contracts as U.S. Tariffs Bite

Export Orders Plunge to Pandemic Lows

April survey data from China’s National Bureau of Statistics revealed that new export orders slid to their weakest level since late 2022, underscoring the toll of steep U.S. tariffs on key industries. Factory managers reported falling demand abroad, driving the export-orders subindex down sharply—mirroring similar drops during the Covid-19 downturn.

• New export orders at their lowest since December 2022

• PMI fell to 49.0, the first contraction in over a year

• Manufacturing activity weakest since late 2022

Tariff Impact Versus Sentiment Effects

While higher duties on Chinese goods have unquestionably pressured order books, analysts at Capital Economics caution that negative sentiment may exaggerate the apparent weakness. Still, the feedback loop is clear: weaker external demand feeds into factory slowdowns, prompting companies to pare back production and inventories.

“Although fiscal support is picking up, it won’t fully offset the drag,” noted economist Zichun Huang, forecasting just 3.5% GDP growth for China this year.

Policy Response and What to Watch

Beijing has stepped up stimulus pledges—ranging from infrastructure spending boosts to credit easing—but markets will be looking for concrete data on their impact. Investors can track upcoming stimulus-related releases and key economic indicators, including future PMI and trade figures, through the Economic Calendar API, ensuring they stay ahead of policy shifts.

Near-Term Risks

• Continued U.S.-China tariff uncertainty

• Slower global trade momentum

• Fiscal stimulus execution lag

As external headwinds persist, watch for further stimulus measures and any breakthrough in U.S.–China negotiations to gauge whether China’s factories can rebound in the second half of the year.