Higher tariffs on U.S. imports from China are putting pressure on China’s economy, with export orders taking a significant hit, according to monthly surveys of Chinese factory managers. The official survey from the China Federation of Logistics and Purchasing reveals a sharp slowdown in export orders for April, following a standoff between Beijing and Washington. U.S. President Donald Trump imposed tariffs as high as 145% on Chinese goods, while China retaliated with duties of up to 125% on U.S. products, along with other measures like tighter restrictions on exports of key minerals used in high-tech products such as electric vehicles.
As a result, American businesses are cancelling orders from China and delaying expansion plans. The official manufacturing purchasing managers index (PMI) dropped to 49.0 in April, its lowest level in 16 months, signaling contraction, down from 50.5 in March. A private survey by Caixin showed a slight decline from 51.2 to 50.4.
Experts note that while the sharp drop in PMIs may overstate the effect of tariffs due to negative sentiment, it still highlights that China’s economy is facing significant external pressures. Larger manufacturers are expected to feel the brunt of this impact, as smaller, labor-intensive companies may continue to benefit from China’s cost advantage in light industries.
Earlier this week, Chinese economic officials held a news conference to showcase efforts to support the economy and counteract the tariff impact. The country’s economy grew at a solid 5% annual rate in 2024, and officials have set a target of maintaining similar growth for this year, though that was before Trump escalated the trade war with additional tariffs.
According to Wang Zhe, a senior economist at Caixin Insight Group, the overall economic expansion slowed in April. Exports stalled, employment shrank slightly, and manufacturers reduced stocks. Logistics delays persisted, and prices remained under pressure. Sentiment in the market also weakened sharply, with business optimism hitting one of its lowest levels in history.
Private economists have downgraded their growth forecasts for China, with Capital Economics predicting a slower growth rate of 3.5% in 2025. The Chinese economy grew 5.4% year-on-year in the first quarter of this year, driven by a rush of companies trying to beat the higher tariffs. However, this surge is expected to be short-lived.
Although some of China’s exports may be redirected to other markets, the escalating trade war with the U.S. has raised fears of a recession in the U.S. and a ripple effect on the global economy. The International Monetary Fund (IMF) recently revised its global growth forecast for 2025 to just 2.8%, down from an earlier prediction of 3.3%.
