U.S. President Donald Trump announced a significant policy shift, imposing an additional 10% tariff on Chinese goods. These tariffs are poised to take effect on March 4, escalating economic tensions between the two global superpowers. This development arrives as China's factory activity experienced its most rapid expansion since November, fueled by both official and private-sector data.
In February, China's official Purchasing Managers' Index (PMI) increased to 50.2, a substantial rise from January's 49.1, signaling growth in its manufacturing sector. A separate private-sector survey revealed an even higher PMI of 50.8, marking the fastest pace of expansion in three months. Since last October, this index has consistently surpassed the 50 threshold, which distinguishes expansion from contraction.
Despite these positive indicators, China's economy—the world's second largest—faces ongoing challenges, including sluggish domestic demand and a prolonged real estate slump. Exports remain a crucial driver of growth for China, but fresh U.S. tariffs threaten to pressure manufacturing activity and potentially dent exports throughout the year. Many exporters had preemptively increased their shipments in anticipation of these tariffs.
The non-manufacturing PMI, encompassing services and construction, also rose slightly to 50.4 from January's 50.2, reflecting modest growth in these sectors. Additionally, the seasonally adjusted Caixin/S&P Global manufacturing PMI surpassed expectations, climbing from 50.1 in January to 50.5 in February, exceeding the Reuters poll forecast of 50.3.
President Trump previously threatened to impose 60% tariffs on China during his campaign trail, and this latest move heightens concerns within China's export-driven economy. The Chinese commerce ministry has urged the U.S. to engage in negotiations promptly while cautioning about possible retaliatory measures.