Recent data indicates that China’s manufacturing Purchasing Managers’ Indexes (PMIs) for April have been demonstrably impacted by the ongoing trade tensions between the United States and China. Further declines were observed in the official non-manufacturing PMI and the composite PMI. These tangible indicators of an export downturn suggest that increased support measures are probable. According to Arjen van Dijkhuizen, an economist at ABN AMRO, Beijing is maintaining a cautious stance in potential trade discussions with the U.S.
April manufacturing PMIs clearly hit by trade war
“This morning’s release of China’s April PMIs represents the first set of monthly macroeconomic data to explicitly reflect the escalating impact of the U.S.-China trade dispute throughout the month. In the manufacturing sector, the official PMI, released by the National Bureau of Statistics (NBS), experienced a more significant decline than anticipated, retreating into contractionary territory. Specifically, the index decreased by 1.5 points, reaching a two-year low of 49.0 (compared to 50.5 in March, with a consensus forecast of 49.7). While the weakening was widespread across various sub-sectors, the sharp decline in the export component was particularly notable – and symbolic of the trade war’s impact – falling by over four points to a post-pandemic low of 44.7.” This sharp decline underscores the challenges faced by Chinese exporters amid heightened tariffs and trade restrictions.
“Concurrently, the official non-manufacturing PMI – which encompasses the services and construction sectors – also registered a decrease, albeit a more moderate one, settling at 50.4 (compared to 50.8 in March, with a consensus forecast of 50.6). The services sub-index edged down to 50.1 (from 50.3 in March), while the construction sub-index experienced a steeper decline, reaching a three-month low of 51.9 (from 53.4 in March). The official composite PMI, a weighted average of the output components for both manufacturing and non-manufacturing sectors, decreased to a three-month low of 50.2 (from 51.4 in March), remaining marginally above the neutral threshold of 50. Further insights into the services sector and overall economic activity are anticipated with the upcoming release of Caixin’s services and composite PMIs for April, scheduled for publication on May 6th.”
“Overall, the observed decline in China’s April PMIs provides compelling evidence of an export shock stemming from the intensified trade war. However, we anticipate that exemptions, strategies to circumvent trade barriers and diversify trade relationships, and further enhancements to monetary and fiscal support will partially mitigate the adverse effects. These adjustments are consistent with our recent revisions to China’s growth forecasts, which have been adjusted to 4.1% (from 4.3%) for 2025 and 3.9% (from 4.2%) for 2026. Furthermore, we observe ongoing efforts by the United States to encourage China to return to the negotiating table, emphasizing the need for China to take the initiative. Nevertheless, China is currently adopting a reserved approach for several strategic considerations.” The situation remains fluid, and market participants are closely monitoring developments in trade negotiations and policy responses from both countries.
