In February, manufacturers in China experienced a surge in orders, as importers hurried to avoid the rising U.S. tariffs initiated by President Donald Trump. Reports from Chinese state media suggested that Beijing was considering retaliatory measures. Trump’s previous 10% tariff on imports from China is set to increase to 20% starting Tuesday. Additionally, the elimination of the “de minimis” exemption, which allowed imports valued under $800 to be free from tariffs, poses a significant challenge to businesses engaged in direct-to-consumer online sales that have been thriving.
A report from the Global Times, a publication connected to China’s ruling Communist Party, indicated that Beijing was exploring both tariff and non-tariff strategies to counteract Trump’s heightened tariffs. When questioned about the report, Foreign Ministry spokesman Lin Jian stated that China would take all necessary steps to firmly uphold its legitimate rights and interests. The report suggested that U.S. agricultural and food products might be targeted, citing an undisclosed source. Last week, officials from China’s Commerce Ministry noted that the two countries were engaged in trade discussions.
The unexpectedly robust data came as Chinese leaders convened in Beijing for the National People’s Congress’s annual session. Lawmakers are anticipated to endorse policies and priorities established by the ruling Communist Party, which may include new initiatives to bolster the slowing economy. Many economists predict that annual growth will decline to approximately 4.5% this year. Surveys of factory managers revealed that China’s official purchasing managers index ascended to 50.2% from January’s 49%, surpassing the crucial 50 mark that separates contraction from expansion. The index for new orders also increased to 51.1.
Capital Economics’ Zichun Huang suggested that steady industrial production, combined with government spending and preparatory actions to circumvent higher tariffs, supported increased business activity last month. However, Huang warned that growth is at risk of decelerating this quarter, potentially reversing the gains seen in the previous quarter. This predicted downturn does not yet account for the full impact of tariffs.
A separate survey, the Caixin manufacturing PMI, released on Monday, indicated a similar positive trend, particularly among smaller, export-driven companies. As noted by Lynne Song of ING Economics, this could serve as a useful barometer for assessing the impact of the new tariffs on the manufacturing sector. With an additional 10% tariff looming, this analysis appears pertinent.
The sudden escalation of tariffs, along with other variables, has introduced uncertainty regarding the future of the world’s second-largest economy, which grew at an annual rate of 5% last year, just meeting the official target set by Beijing. As the congress opens on Wednesday, Premier Li Qiang is expected to present an annual work report outlining the growth target for the year, among other policies and economic updates.
The year 2025 marks the culmination of leader Xi Jinping’s “Made in China 2025” initiative aimed at elevating Chinese industries to global prominence in advanced technology. It also concludes China’s 14th five-year plan, the party’s customary mid-term policy-setting document. A central goal likely includes strategies to increase consumer spending, a weakness in the state-controlled economy exacerbated by the COVID-19 pandemic. The government has recently taken steps to provide more support for private businesses as part of this plan, and increased exports along with targeted spending initiatives have contributed to this effort.
