China’s manufacturing sector and e-commerce exports to the United States (U.S.) have taken a severe hit as President Donald Trump’s aggressive tariff policies trigger a deepening trade war.
The National Bureau of Statistics reported that China’s manufacturing Purchasing Managers’ Index (PMI) dropped to 49.0 in April, the lowest since December 2023, signaling a contraction in factory activity for the first time in 16 months. This sharp decline, down from 50.5 in March, reflects the immediate impact of Trump’s tariffs, which include a 145% duty on most Chinese goods, implemented in early April.
The tariffs, part of Trump’s “Liberation Day” trade agenda, have disrupted China’s export-driven economy, with the U.S. being its largest market for online trade, accounting for over one-third of sales.
E-commerce giants like Alibaba, Temu, and Shein face unprecedented challenges as a closed loophole for duty-free shipments under $800 now imposes a 30% fee, set to rise to $50 by June. This has led to a 35% drop in shipments to the U.S., with Chinese exporters reporting cancelled orders and rising costs.
Small factories in Guangzhou, employing millions, are furloughing workers as orders for goods like apparel and appliances dry up.
Beijing retaliated with 125% tariffs on U.S. imports and export controls on rare earth minerals, escalating tensions.
Chinese firms are pivoting to markets in Latin America and Africa, but these cannot fully offset the loss of U.S. demand. Alibaba is aiding sellers to diversify, yet domestic e-commerce growth is insufficient to bridge the gap.
Economists at Capital Economics predict China’s economy will grow just 3.5% in 2025, missing Beijing’s 5% target, as external demand weakens.
The trade war has sparked fears of a global recession, with U.S. retailers like Walmart facing supply shortages and higher prices.
While Trump claims tariffs will boost U.S. manufacturing, a CNBC survey suggests reshoring is unlikely, with costs potentially doubling for American firms. As both nations dig in, the global economy braces for further disruption, with no resolution in sight.
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