But Trump’s tariffs have begun to get involved in China’s economy and are becoming increasingly obvious.
Read also: China stands at the threat to economic tariffs, saying there are tools to protect
The factory is losing its buzz
China’s factory activity shrank in April, official data showed on Wednesday, with Beijing blaming the “sharp changes” in the global economy on a trade war with the United States. The Purchasing Managers Index, a key measure of industrial output, dropped to 49 in April, below 50 points.
Reading volume in April was down from 50.5 in March, the highest in 12 months. This is a scale, where 50 mark the rupture between expansion and contraction. The private survey of the financial information group Caixin fell from 51.2 to 50.4. The rate of non-manufacturing PMI measuring service sector activity was 50.4, down from 50.8 in March. “The weak PMI in April was driven by the trade war,” Zhang, president and chief economist at Pinpoint Asset Management, wrote in a note.
“As external demand cools down, China’s economy is under pressure,” said Zichun Huang, an economist in Capital Economics. Huang added: “While the government is strengthening fiscal support, it is unlikely that this will completely offset the resistance, and we expect the economy to expand by only 3.5% this year.”
Also Read: Trade War Bites Entering China’s Manufacturing Activities
Last year, authorities announced a series of positive stimulus measures aimed at increasing growth, including lowering interest rates and easing some home purchase restrictions.
Economists at ANZ Research say the blow from large manufacturers may be more severe than smaller manufacturers with labor-intensive workforces, as China still has the cost advantage of such products. “China’s manufacturing costs for light industries are likely to be one fifth of that of the United States, and that’s unlikely to change,” they said in a report.
“Overall, in April, the expansion of supply and demand slowed down, exports stood down and slightly narrowed. Manufacturers tried to reduce stocks, delayed logistics, and prices were still under pressure. The market optimism volume weakened significantly,” wrote Wang Zhe, senior economist at Caixin Insight Group. Wang said business sentiment was one of the lowest levels on record.
China’s copper supply will be used up
Senior executives at Mercuria, a commodity trading room, told the Financial Times that China’s copper inventory is expected to gradually reduce in a few months, one of the biggest tightening shocks in its history. The Geneva-based group said that as buyers are rushing to hand over copper before the Trump administration imposes taxes, it is attracting metals from the rest of the world to the country and competing directly with China for supplies.
Inventories of Chinese copper have dropped rapidly over the past few weeks, “at the current draw rate, these Chinese stocks may run out. [to zero] By mid-June, Nicholas Snowdon, head of metals and mining research at Mercuria, told the Financial Times. “This is probably one of the biggest tightening shocks in this market ever.
Analysts say China’s retaliatory tax on U.S. imports could also break into the crucial copper scrap market, increasing the tightness of the Chinese market. If the United States bans exporting copper scrap, it could be a big exporter, and that could worsen. According to commodity pricing Fastmarkets, it shipped 960,000 tons in 2024, almost half of which went to China.
Due to its unique characteristics and crucial role in copper, copper has become increasingly important due to its transition to renewable energy and electric vehicles in various industries, especially to renewable energy and electric vehicles. Its high electrical and thermal conductivity, its durability and corrosion resistance make it crucial for wiring, power transmission and a wide range of other applications. The demand for copper is often seen as an indicator of economic health because its use is closely related to various industrial sectors.
A abused Beijing prepares for Trump’s “whitelist”
China has created a list of products made in the United States that will be exempt from its 125% tariff and quietly informed companies about the policy, two familiar with the matter told Reuters that Beijing is trying to mitigate the impact of its trade war with Washington.
China has approved tariff exemptions for specific products, including select drugs, microchips and aircraft engines, and requires companies to determine the key commodities they need without fees, Reuters reported on Friday. However, the existence of the so-called “whitelist” has not been reported before.
The quiet approach has led Beijing to repeatedly express willingness to fight until the end unless the United States raises its 145% tariff to maintain its public messaging while taking practical steps privately to provide concessions.
Authorities are contacting the company privately and have notified that there is a tax-free product classification list, a source working for a drug company selling drugs in the United States in China told Reuters. Sources said the Shanghai Pudong government contacted the company on Monday, adding that the company had previously lobbied for tariff exemptions because it relied on U.S. technology from certain U.S. products. Another source told Reuters that some companies were asked to contact authorities privately to ask whether they themselves imported products were eligible for exemptions.
Reuters reported on Tuesday that the list of exempted products also appears to be growing: China exempts tariffs on U.S. ethane imports. Major Ethane processors have been seeking tariff exemptions from Beijing, as the United States is the only supplier.
(with agent input)
