U.S. President Donald Trump has signed executive orders imposing significant tariffs on imports from Mexico, Canada, and China, escalating global trade tensions. The tariffs impose a 25% duty on Mexican and most Canadian imports, while Chinese goods face a 10% tariff. These measures, particularly targeting Chinese imports, took effect on Tuesday. In response, China's Commerce Ministry stated the tariffs represent a "serious violation of international trade rules" and announced plans to challenge the decision at the World Trade Organization. Beijing promises to "take relevant countermeasures to firmly safeguard its own rights and interests."
The introduction of these tariffs coincides with a slowdown in China's factory activity. According to a private-sector survey, the Caixin/S&P Global manufacturing purchasing manager's index recorded a marginal drop to 50.1 in January, down from 50.5 in December. This figure narrowly stayed above the 50 mark, indicating expansion in manufacturing activity, albeit at a slower pace than anticipated. The official data painted a bleaker picture, showing an unexpected contraction in factory activity with a PMI reading of 49.1 for January.
Despite achieving its full-year growth target of 5.0% last year, China continues to grapple with internal economic challenges. The nation faces a tepid domestic demand and a prolonged real estate downturn, both critical factors affecting growth. Exports remain a pivotal component of China's economic engine. However, the newly imposed U.S. tariffs could hinder this growth avenue, prompting Beijing to undertake measures to boost domestic consumption and stimulate economic activity.
Chinese authorities have pledged to prioritize domestic consumption enhancement, expanding consumer goods trade-in programs as part of policy support measures introduced late last year. While some sectors have shown signs of stabilization, the broader economic landscape remains fraught with uncertainty. The recent PMI figures underscore the ongoing struggle as China navigates through global economic headwinds and internal demand constraints.