BEIJING (Reuters) – China’s factory activity likely contracted in April, a Reuters poll showed on Tuesday, as Donald Trump’s “Liberation Day” package of tariffs brought a sudden halt to two months of recovery.
A Reuters poll of 30 economists forecast the official purchasing managers’ index (PMI) will come in at 49.8 on Wednesday, down from February’s 50.5 and below the 50-point threshold that separates growth from contraction in activity.
U.S. President Trump’s decision to single China out for tariffs of 145% comes at a particularly difficult time for the world’s No.2 economy, which is struggling with deflation due to sluggish income growth and a prolonged property crisis.
Producers had been front-loading outbound shipments in anticipation of the duties, driving exports to a five-month high in March, but the tariffs arrival has now called time on that strategy.
Policymakers have largely relied on exports to shore up the fragile economic recovery since the end of the pandemic and only began to take steps to boost domestic demand more earnestly late last year.
Analysts expect Beijing to deliver more monetary and fiscal stimulus over the coming months to underpin growth and insulate the economy from the tariffs.
China has repeatedly denied it is seeking to negotiate with the U.S. a way out of the tariffs, and appears to instead be betting on Washington blinking first. As such, Beijing has advanced this year’s stimulus plans to tie the economy over to mitigate the pain of losing, at least temporarily, its biggest customer.
On Monday, the vice head of China’s state planner said the National Development and Reform Commission (NDRC) would roll out new policies over the second quarter in line with the prevailing economic conditions of the time.
That followed pledges by the Communist Party’s elite decision-making body, the Politburo, on Friday to support firms and workers most affected by the duties.
The general consensus among China observers is a second trade war with the U.S. will significantly weigh on growth, but the NDRC’s Zhao Chenxin said he was confident the country would achieve its 2025 economic growth target of around 5%.
The International Monetary Fund, Goldman Sachs and UBS all recently revised down their economic growth forecasts for China over 2025 and into 2026, citing the impact of U.S. tariffs – none of them expect the economy to hit Beijing’s official growth target.
Analysts polled by Reuters forecast the private sector Caixin PMI fell to 49.8, down from 51.2 a month prior. The data will be released on April 30.
(Reporting by Joe Cash; Editing by Sam Holmes)
Comments