China’s Factory Activity Shrinks in April as US Tariffs Take Toll

China’s manufacturing sector took a hit in April as factory activity contracted more than expected, adding fresh pressure to an already struggling economy.

According to official data released Wednesday by the National Bureau of Statistics (NBS), the Purchasing Managers’ Index (PMI) dropped to 49.0, falling below the key 50-point threshold that separates growth from contraction. The reading was not only a decline from March’s 12-month high of 50.5 but also missed Bloomberg’s forecast of 49.7.

The contraction coincides with the full impact of punishing US tariffs — up to 145% on Chinese goods — which took effect in April. In retaliation, Beijing slapped 125% tariffs on American imports. The result: rising uncertainty, slower factory output, and growing fears over the long-term impact of this economic standoff.

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“In April, the PMI fell due to a high base from earlier growth and a sharp shift in global conditions,” said NBS statistician Zhao Qinghe. The non-manufacturing PMI, which tracks the services industry, also dipped slightly to 50.4 from 50.8 in March, reflecting broader economic softness across sectors.

Economists warn the trade war could exacerbate inflation, disrupt global supply chains, and push the world closer to a recession.

“The weak manufacturing PMI in April is driven by the trade war,” noted Zhiwei Zhang of Pinpoint Asset Management. “Macro data in both China and the US will likely weaken further as trade policy uncertainty continues to stall business decisions.”

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Beyond trade tensions, China is also grappling with tepid domestic demand and a lingering property sector crisis, slowing its post-COVID recovery. While exports jumped over 12% in March as companies rushed to beat tariffs, economists say this surge is unsustainable.

Despite fiscal stimulus efforts and a government growth target of 5% for 2025, experts like Zichun Huang of Capital Economics predict growth may stall at around 3.5%, citing weak external demand and limited policy impact.