China's April factory data just delivered a wake-up call. The official manufacturing PMI slipped to 49—its worst reading since December—confirming that Donald Trump's 145% tariffs are already hitting the country's industrial core. Export orders dropped off a cliff, factory jobs were cut at the fastest pace in over a year, and financial institutions from Morgan Stanley to Nomura are warning of a deeper slowdown this quarter. Beijing responded with mild support for exporters and consumption, but fell short of the bold stimulus markets were hoping for. The yuan dipped on the news before stabilizing. The CSI 300 barely moved.
Robin Xing, Morgan Stanley's top China economist, didn't mince words: “It's worse than expected. Tariffs have started to bite.” He sees more pain ahead unless Beijing moves swiftly. UBS and Goldman Sachs have already trimmed 2025 growth forecasts below 4%, citing signs like collapsing cargo shipments—down as much as 60% by some estimates. Meanwhile, private Caixin data showed small exporters barely hanging on, as new orders flatlined. Nomura's Lu Ting is urging policymakers to fix deeper structural issues, warning that without decisive action, the risk of a demand shock is rising fast.
Even before the tariffs hit, industrial profits were anemic—up just 0.8% in Q1. China's top solar players alone racked up $1.1 billion in losses from crashing prices and oversupply. Supply chains, export demand, and domestic confidence are all under pressure. Beijing insists it can still hit 5% growth this year. But without stronger moves soon, that target may turn out to be more political slogan than economic reality.
