China’s manufacturing sector is facing one of its toughest periods in recent years. The Purchasing Managers Index (PMI) dropped to 48.3 in May 2025—the lowest since September 2022—clearly signaling contraction. This downturn comes amid rising U.S. tariffs and weakening global demand, placing increased pressure on the world’s second-largest economy.
Tariffs and Weak Demand Deliver a Double Blow
U.S. trade pressure and elevated tariffs have severely impacted China’s export sector. New export orders fell to their lowest level since July 2023, while total new orders declined for the first time in eight months. Manufacturing output also contracted at the fastest pace since November 2022. Meanwhile, job losses are accelerating, with the sector seeing its steepest workforce cuts in nearly three years.
Signs of a Shift in Beijing’s Stance?
While China has so far resisted U.S. trade pressure, recent developments suggest a potential shift. Following a brief meeting between Treasury Secretary Scott Bessent and Chinese officials, reports confirmed that Xi Jinping and Donald Trump held new trade talks. The economic damage appears to be mounting, and behind closed doors, there may now be real urgency to reach a deal.
Conclusion:
The sharp decline in manufacturing, employment, and global demand has pushed China’s economy into a vulnerable position. Although new trade talks offer a glimmer of hope, without a concrete agreement soon, the risk of a deeper recession remains. The coming months will be crucial in determining the direction of China’s economic recovery.
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