Factory activity in China saw some improvement in June after President Donald Trump decided to delay the implementation of higher tariffs on Chinese imports for a period of 90 days. Despite this relief, overall manufacturing activity continues to contract, a survey detailed on Monday. The purchasing managers index, which gauges various business activities such as new orders, slightly increased to 49.7 from 49.5 in May, according to figures from the National Bureau of Statistics. This index is measured on a scale from 0 to 100, where a reading above 50 indicates an expansion.
Similar patterns were observed in Japan and Korea, with reports indicating akin trends. President Trump has communicated that he does not intend to extend the 90-day suspension of tariffs beyond July 9 for most nations. The cessation of imposing heftier tariffs on China, which was agreed upon in early May, is set to expire roughly a month later.
This temporary delay in tariffs stirred a resurgence in manufacturing operations as businesses and individuals hurried to benefit from reduced import tariffs. However, this mainly favored larger manufacturers while smaller and mid-sized companies were still seeing a decline. Additionally, overall hiring rates fell during this period.
Exports and new export orders remained below 50, illustrating continued contraction. In Japan, industrial output experienced a slight increase of 0.5% in May, falling short of analysts’ expectations, which had pegged a 3.5% rise. Marcel Thieliant of Capital Economics remarked that the modest rise in industrial production indicated that firms were not reaping benefits from elevated U.S. tariffs on Chinese imports. Further, projections suggested ongoing weakness.
South Korea’s government disclosed a 2.9% year-on-year decrease in its “all industry” output measure for May, with computer chip production dropping by 2%. Vehicle production also saw a year-on-year decline of 2.3%, which followed a 4.1% fall in April.
Speaking on Fox News Channel’s “Sunday Morning Futures,” Trump reiterated that the 90-day tariff suspension for most nations would not be extended beyond July 9. The initial delay on escalating tariffs for China will lapse approximately a month later. Trump announced that countries would be informed of impending trade penalties unless deals are forged with the United States. He had previously downplayed the deadline at a White House press event, highlighting the challenge of securing individual trade agreements with each country within such a period. The administration aimed for securing 90 trade deals in 90 days.
Despite having recently inked a trade agreement with Beijing regarding rare earth exports, achieving a fairer trade relationship will likely necessitate significant tariffs. However, details concerning the latest efforts to alleviate trade frictions remain sparse, and substantial disputes between the world’s two largest economies still require resolution. Trump expressed optimism about the relationship with China, stating, “I think getting along well with China is a very good thing. China’s going to be paying a lot of tariffs, but we have a big (trade) deficit, they understand that.”