China's Factory Growth Slows in January Amid Looming U.S. Tariffs
Beijing, Monday, 3 February 2025.
China’s January factory output fell short of expectations, as the Caixin PMI recorded 50.1. This slowdown coincides with U.S. preparing new tariffs, affecting global trade dynamics.
Manufacturing Activity Near Stagnation
The Caixin/S&P Global manufacturing PMI registered 50.1 in January 2025, barely maintaining expansion territory and falling below the expected 50.5 [1][3]. This marks a continued deceleration from previous months, with readings of 50.5 in December and 51.5 in November 2024 [1]. More concerning, the official manufacturing PMI has already slipped into contraction territory at 49.1 [1][3], suggesting broader weakness across China’s manufacturing sector.
Employment and Export Concerns
A particularly troubling development is the employment sub-index hitting its lowest level since February 2020 [4], as businesses exercise caution in hiring amid economic uncertainty. New export orders have declined for the second consecutive month [1], indicating weakening international demand. According to Wang Zhe, senior economist at Caixin Insight Group, ‘Rising uncertainty in international policies could worsen China’s export environment’ [1].
Imminent U.S. Tariff Impact
The manufacturing slowdown comes at a critical time as U.S. President Donald Trump has signed executive orders implementing 10% tariffs on Chinese goods, set to take effect from February 4, 2025 [1]. Lynn Song, chief China economist at LNG, warns that the export sector ‘is likely to remain under pressure in the coming months, particularly if the U.S. tariffs do indeed come into effect on Feb. 4’ [1].
Economic Recovery Challenges
While China achieved its 5.0% growth target in 2024 [1], the effectiveness of previous stimulus measures may be waning. The manufacturing sector faces multiple headwinds, including declining employment, weak external demand, and price pressures [3]. Despite some improvement in logistics, with delivery times at their fastest pace since May 2023 [4], business optimism remains below historical averages due to ongoing concerns over China-U.S. trade relations [4].