China’s Manufacturing Sector Contracts in April Amid Escalating U.S. Tariffs

The intensifying U.S.-China trade tensions have led to a significant downturn in China’s manufacturing sector, raising concerns over global economic stability.​

China’s manufacturing activity shrank in April 2025, with the PMI falling to 49.0, as heightened U.S. tariffs and retaliatory measures dampen trade and economic growth.​

In April 2025, China’s manufacturing sector experienced a notable contraction, with the official Purchasing Managers’ Index (PMI) dropping to 49.0—the lowest level in nearly two years. This decline marks the first contraction since January and reflects the mounting pressures from escalating trade tensions with the United States. ​

The downturn is largely attributed to the U.S. administration’s imposition of steep tariffs on Chinese goods, with rates reaching up to 145%. These measures have significantly impacted China’s export-driven industries, leading to a sharp decrease in new export orders, which fell to 44.7—the lowest since the COVID-19 pandemic in 2022. ​

In retaliation, China has implemented its own set of tariffs, imposing up to 125% duties on U.S. imports and restricting exports of critical materials such as rare earth metals. These countermeasures aim to mitigate the impact of U.S. tariffs but have also contributed to the overall slowdown in manufacturing activity. ​

The contraction in manufacturing is not limited to exports; domestic demand has also weakened. The non-manufacturing PMI, which includes services and construction sectors, slipped to 50.4, indicating a slowdown in broader economic activity. ​

Economists warn that the ongoing trade dispute could have far-reaching consequences. Analysts from Capital Economics project that the tariffs could directly affect 2.2% of China’s GDP, potentially resulting in a 1.1% GDP loss in the short term. This downturn threatens millions of manufacturing jobs and has prompted Beijing to ramp up fiscal stimulus to counteract the economic slowdown.​

The ripple effects of the U.S.-China trade tensions are being felt globally. Asian economies with strong trade ties to China, such as South Korea and Japan, are experiencing declines in their export orders and manufacturing activities. The global manufacturing landscape is becoming increasingly volatile as countries navigate the uncertainties of the ongoing trade war. ​

Despite the challenges, China’s government remains committed to its growth targets. Beijing continues to pursue its 5% growth target for 2025, although external pressures and cooling demand pose significant challenges. The government is expected to implement further fiscal and monetary policies to stimulate the economy and support affected industries.​

As the trade dispute shows no signs of abating, businesses and investors worldwide are closely monitoring developments. The outcome of the U.S.-China trade tensions will have significant implications for global economic stability and the future of international trade relations.