Latest news with #EllenZhang
Yahoo
19-05-2025
- Business
- Yahoo
China's factory output resists tariff impact, retail sales disappoint
By Tina Qiao, Ellen Zhang and Ryan Woo BEIJING (Reuters) -China's factory output slowed in April but showed surprising resilience, a sign that government support measures may have cushioned the impact of a trade war with the U.S. that threatens to derail momentum in the world's second-largest economy. Industrial output grew 6.1% from a year earlier, National Bureau of Statistics (NBS) data showed on Monday, slowing from 7.7% in March but beat a forecast 5.5% rise in a Reuters poll. "April's resilience is in part a result of 'frontloaded' fiscal support," said Tianchen Xu, senior economist at the Economist Intelligence Unit, referring to stronger government spending. The data followed firmer-than-expected exports earlier this month that economists said were supported by exporters rerouting shipments and countries buying more materials from China amid a re-ordering of global trade due to U.S. President Donald Trump's tariffs. However, Monday's data underscored the shock from U.S. reciprocal tariffs, Xu said, adding "despite the rapid growth in industrial value-added, the export delivery value was nearly stagnant." Beijing and Washington reached a surprise agreement last week to roll back most tariffs imposed on each other's goods since early April. The 90-day pause has put the brakes on a trade war that has disrupted global supply chains and stoked recession fears. "China's foreign trade has overcome difficulties and maintained steady growth, demonstrating strong resilience and international competitiveness," Fu Linghui, statistics bureau spokesperson, told a press conference on Monday. He added that the trade de-escalation would benefit bilateral trade growth and global economic recovery. But economists have warned that the short-term truce and U.S. President Donald Trump's unpredictable approach will continue to cast a shadow over China's export-driven economy, which still faces 30% tariffs on top of existing duties. By midday, China's blue-chip CSI300 Index dropped 0.4% and the Shanghai Composite Index lost 0.1%. The yuan currency also slipped against the dollar. PRESSURES REMAIN The property sector has yet to show signs of recovery, with home prices stagnating and investment in the sector shrinking. Retail sales, a measure of consumption, rose 5.1% in April, down from a 5.9% increase in March, and missed forecasts for a 5.5% expansion. Economists attributed the slowdown to the impact of U.S. tariffs on consumer expectations and tepid demand at home. Commodity sectors also showed signs of weakness with the country's daily crude oil processing rate down 4.9% in April from March, while crude steel output slid 7% month-on-month. Meanwhile, the government's push to boost household spending via a trade-in scheme for consumer goods led to a 38.8% gain in home appliance sales. The NBS data also showed the unemployment rate fell to 5.1% from 5.2% in March. But anecdotal evidence showed that some factories heavily reliant on the U.S. market have sent their workers home. With persistent deflationary pressures and worse-than-expected bank lending data, economists highlighted the need for more policy support to foster a sustainable recovery. "We caution that the near-term growth strength is at the cost of payback effects later and believe more policy easing is necessary to stabilise growth, employment and market sentiment," Goldman Sachs economists said in a note. China's economy expanded 5.4% in the first quarter, exceeding expectations. Authorities remain confident of achieving Beijing's growth target of around 5% this year, despite warnings from economists that U.S. tariffs could derail this momentum. Alarmed by how tariffs have hurt economic activity, authorities earlier this month announced a package of stimulus measures, including interest rate cuts and a major liquidity injection. The monetary easing measures were announced before the China-U.S. trade detente was reached after high-stakes talks in Geneva, marking a significant de-escalation from months of mounting tensions. The U.S.-China "deal" agreed at the start of last week will provide some relief, said Julian Evans-Pritchard, head of China Economics at Capital Economics, "but even if the tariff rollback proves durable, wider headwinds mean that we still expect China's economy to slow further over the coming quarters." "We suspect that the trade war has made households more concerned about their job prospects and therefore more careful about their spending."
Yahoo
15-04-2025
- Business
- Yahoo
At China's largest trade fair, exporters say US markets are 'frozen'
By Ellen Zhang and Kevin Krolicki GUANGZHOU, China (Reuters) - Candice Li says that after Washington raised tariffs on Chinese goods by 145%, U.S. orders for the medical devices her firm is making have vanished. "It's a matter of life and death because 60-70% of our business is with American clients," said Li, marketing manager of Conmo Electronic Co. "Goods cannot be exported and money cannot be collected. This is very severe." Li was at her firm's booth at the Canton Fair, China's biggest trade expo held twice-a-year in the southern city of Guangzhou, where more than 30,000 exhibitors showcase their products over an area larger than 200 football fields. This was the first such fair China has held since U.S. President Donald Trump slapped tariffs in excess of 100% on China and of at least 10% on the rest of the world earlier this month. Most exporters Reuters spoke with said U.S. orders, which for firms like Li's are vital, have either been delayed or stopped coming - a bad sign for the world's second-largest economy, whose growth last year relied heavily on running a trillion-dollar trade surplus. No other country comes close to matching China's sales of more than $400 billion in goods to the U.S. each year. And while Trump's tariffs on the rest of the world are much lower, they are likely to curb global demand in coming months - and implicitly, the appetite for Chinese goods in other countries. Kobe Huang, sales representative at Shenzhen Landun Environmental Technology, which makes water filters and smart toilets, says that for now, European sales are up, but the U.S. market is "frozen." U.S. customers and distributors haven't cancelled orders, he said. "They have asked us to hold on. We are holding on." U.S. importer Levy Spence, president of Air Esscentials, was browsing for the scented products on offer at the fair, but had no particular plan for purchases, because "every day I wake up, I feel like it's a different tariff." "Prices are going to go up," he said. "Even for the stuff that we source in the United States, a lot of the raw materials are sourced from around the world. It's not just the China tariffs." Organisers said about 170,000 overseas buyers had registered as of April 8 for this month's fair, compared with a record final attendance of 253,000 at the previous edition, which concluded in November. About 10% of those were from the U.S. and Europe, down from roughly 20% last time. The fair takes place April 15-May 5. Deals at the previous edition totalled $25 billion, local media said. DIVERSIFICATION Many exporters said they have been either diversifying their production bases outside China, or the markets they sell to, away from the United States. Henry Han, sales manager at Apexto Electronics Co, which makes SSD and micro SD flash drives, says the U.S. market only accounts for 10% of direct sales, down from 30% before the pandemic. Many of their customers take shipments of components for final assembly in a third country to avoid the tariffs. Apexto undertook a study last year to see if it can shift production to Vietnam or the Philippines to avoid direct impact from U.S. tariffs, but Han said these plans were now on ice because these countries may also face high levies. Trump, on April 2, slapped a 46% tariff on Vietnam and 17% levy on the Philippines before paring those back to 10% for the next three months as he begins bilateral negotiations on trade with about 75 different countries. Sales manager David Du, from speaker maker Zealot, said an order from Skechers for 30,000 speakers to be distributed to their U.S. stores was put on hold after Trump's tariffs. But he said he can rely on other markets. Zealot got a big and unexpected break in 2015, when an all-in-one speaker, power bank and emergency flashlight became a hit in Nigeria, now a market twice as big as the U.S., accounting for 40% of total sales and taking in 45 containers monthly. "We are as big as JBL" in Nigeria, Du said, referring to the Californian audio equipment brand. Li, from the medical devices maker, said her firm cannot find new markets overnight. She fears Conmo will soon have to cut working hours, and eventually, staffing levels. "I worry that if the situation remains deadlocked, and neither side gives in, the ones who will ultimately suffer are the ordinary people," said Li. "How will their salaries be paid? There will be unemployment." (Additional reporting by Xiaoyu Yin and Tingshu Wang in Guangzhou; Writing by Marius Zaharia; Editing by Kim Coghill) Sign in to access your portfolio
Yahoo
04-04-2025
- Business
- Yahoo
Analysis-Nowhere to hide: Trump tariffs leave trading partners cornered
By Ellen Zhang, Maria Martinez and Promit Mukherjee BEIJING/BERLIN/OTTAWA (Reuters) - U.S. trading partners have few good options in their trade war with President Donald Trump, other than to sue for peace. Hit by 10%-50% tariffs on their exports to the world's dominant economic superpower, most lack the firepower to hit back or the political will to slug it out, say government officials, economists and trade experts. This is why the vast majority of trading partners did not immediately retaliate and indicated a readiness to negotiate a face-saving compromise with Trump. Even among those that have taken counter measures, the door was left ajar to talks. From China, which on Friday slapped extra tariffs of 34% on all U.S. goods, to Canada, which has taken limited retaliation, nations are tipped to come to the negotiating table sooner or later, given U.S. consumption is so important globally -- two-thirds bigger than EU consumption, according to World Bank data. Other than talks, governments have limited options to protect their export industries and broader economies. These include spending on state aid or on broader economic stimulus -- Spain announced a €14 billion ($15.5 billion) aid package on Thursday -- or looking to greener trade pastures. German officials are eyeing up Mexico, Canada and India. But for a world already deep in state debt after years of pandemic-era stimulus spending, it will be tough for some to fund the subsidies and other financial aid required to stave off economic growth downgrades, profit warnings and layoffs. Economists expect Beijing to unleash more fiscal stimulus to support its economy, which sells goods worth more than $400 billion a year to the United States. It will also try to develop other export markets, according to Chinese policy advisers. "We need to strengthen our coordination with ASEAN, Japan, South Korea, EU and UK," said one Chinese adviser, speaking on condition of anonymity because of the issue's sensitivity. Trump's "Liberation Day" tariffs took the tax imposed on Chinese exports since his January inauguration to 54%. Even with China's economic armoury -- its financial might, domination of critical mineral and metal production for advanced industries and centrality to global supply chains -- a negotiated truce is ultimately expected, the trade adviser said. That could take a while, given the enmity between Washington and Beijing, though there is speculation that Trump and Chinese President Xi Jinping could meet in the United States in June. ECONOMIC SHOCKS Countries lacking China's power may reach the table sooner. India, hit with a 27% tariff, is already in talks and is not considering retaliation, said a government official. It had made concessions to Washington ahead of the latest tariffs and it is open to cutting tariffs on more than half of U.S. imports worth $23 billion in a first-phase deal, government sources said. Vietnam, too, is expected to prioritise negotiations, with limited scope for subsidies and trade diversification. It could try leveraging the exposure that some U.S. manufacturers have to Vietnam to pressure the Trump administration, according to Leif Schneider, head of international law firm Luther in Vietnam. But, he added, "Vietnam will likely prioritise negotiations to avoid an economic shock." Hit by a 46% tariff, it ranks as the sixth-biggest exporter to the United States, thanks to its success as an offshoring option for manufacturers diversifying away from China. Southeast Asia in general has nowhere to run. Its efforts to deepen trade with China, Japan and other big neighbours have led to an alphabet soup of trade groupings which facilitate trade but fall well short of compensating for a U.S. trade shock. Ahead of Trump's announcement, China, Japan and South Korea held their first economic dialogue in five years, seeking to boost regional trade. But there is scepticism it will go far, not least because these three are exporting powerhouses, not net contributors to global demand. LAYOFFS HAVE STARTED The European Union, already feeling abandoned by the Trump administration over security, said the common market of 450 million people was ready to retaliate against Trump's 20% tariff against the bloc and also look to other markets. "Forging alliances ... is the order of the day," German Economy Minister Robert Habeck said, singling out Mexico, Canada and India where closer trade relations would make sense. Trade deals can take time, though -- time that Europe and others don't have. The EU and South America's Mercosur bloc talked for 25 years before unveiling a free trade deal in December. Trump's reciprocal tariffs take effect on Wednesday. It also takes time to rewire an economy to cope with global protectionism, which is what German economists say is the right response. Structural reform, such as more competition and tech investment, is preferable to state stimulus, they say. "There is not much that either fiscal or monetary policy can do in the short term to offset the trade shock," Deutsche Bank economist Robin Winkler said. German bank Berenberg says a large part of the new U.S. tariffs can be rolled back in negotiations, with Europe offering concessions such as more contracts to U.S. defence firms. Canada was spared additional tariffs this week but it is reeling from earlier, 25% U.S. tariffs on its auto, steel and aluminium exports. Canada is splurging on subsidies, funded by its own retaliatory tariffs, but the pain is still being felt. European carmaker Stellantis NV said on Thursday it would pause production at a Canadian assembly plant. And companies have reported that they have already started layoffs and pivoting towards newer markets. Some nations have complained to the global trade referee, the World Trade Organisation, but that is judged a feeble option by trade experts, not least because Trump paralysed its top appeals bench in his first term. Nor is the Geneva body seen as a likely venue for renegotiating tariff disputes. "If they keep pushing protectionism and sticking to this one-sided perspective, I don't see them coming back to the WTO for multilateral negotiations anytime soon," said Marco Molina, of consulting firm Molina & Associates and former deputy permanent representative of Guatemala to the WTO. "And that's a real shame because the WTO was literally designed to address issues like these." ($1 = 0.9057 euros) Sign in to access your portfolio
Yahoo
03-04-2025
- Business
- Yahoo
Analysis-Trump's global tariffs hurt China with 'all-round blockade'
By Ellen Zhang and Casey Hall DONGGUAN, China (Reuters) - Chinese outdoor furniture maker Jin Chaofeng set up a factory in Vietnam last July to escape higher U.S. tariffs. Now he is looking to close it, as Washington imposes steep levies on Hanoi and the rest of the world. "I've done all this work for nothing," Jin said, adding that foreign trade would become a "very thin-margin" business, just like the demand-starved Chinese market. No other country comes close to matching China's annual sales of more than $400 billion in goods to the United States each year. President Donald Trump just hiked tariffs by an extra 34 percentage points on those goods. His world-wide tariffs strike at the core of Chinese exporters' two main strategies to blunt the impact of trade war: moving some production abroad and increasing sales to non-U.S. markets. The sweeping tariffs could deal a lasting blow to global demand. China is more exposed to the risk of shrinking world commerce than any other nation, with economic growth last year relying heavily on running a trillion-dollar trade surplus. Kaiyuan Securities expects the new tariffs could slash Chinese exports to the United States by 30%, cut overall exports by more than 4.5%, and drag economic growth by 1.3 percentage points. "It's an all-round blockade against China," said Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management, who said he was bullish on gold and shorting China and Hong Kong stocks as a result. Ahead of Trump's re-election in November, many Chinese manufacturers were already relocating some production facilities to Southeast Asia and other regions. Now their new factories face tariffs of 46% in Vietnam, 36% in Thailand and at least 10% anywhere else. As Trump raised tariffs on China by 20 percentage points in February and March, the global salesforce of its manufacturers was in a rat race for new export markets in Asia, Latin America and elsewhere. Now these economies are taking their own tariff hit, probably reducing their purchasing power, and their demand for Chinese goods. Analysts say Washington's new measures are the type of punch and clinch on Beijing that could derail China's economic growth and its efforts to fight deflation. "This will make it impossible for the 5% growth target to be achieved," said Zhiwu Chen, a finance professor at HKU Business School. "China cannot get out of this deflationary situation anytime soon. This new tariff increase is definitely making things worse." The external demand shock is feeding back internally, as producers are under pressure to cut costs. Jerry Jiao, whose factory in China makes cast-iron bathtubs, said he had already "laid off some employees, reduced management costs, and cut down on various expenses" this year. Li Zhaolong, the manager of a clothing factory in the southern city of Guangzhou, said he needed to rely more on domestic orders, but worried about subdued demand. "You had one cake for one person before, but now five people want to eat it," said Li. RISING BARRIERS? In 2023, about 145 countries traded more with China than with the United States, an increase of nearly 50% from 2008, according to research by investment bank Jefferies. That is a measure of China's success over decades in developing competitive industries under a world trade order the United States created, but which it now considers unfair and a threat to its own security. "We still need to diversify our export markets, support exports and encourage businesses to focus more on domestic sales," said a Chinese trade policy adviser who spoke on condition of anonymity. "The risk of a global recession is real," however, he warned, adding: "If everyone submits, the United States will indeed profit, as if others are paying tribute. But if they resist and retaliate continuously, the U.S. economy won't be able to handle it." For China, the other risk is that more of its trade partners will see its exporters competing ever more heavily on price in their markets and throw up trade barriers of their own to protect domestic industries. "That is true both in Europe and many emerging market economies," said Louis Kuijs, S&P Global's chief Asia economist. Domestic factors also add challenges to any Chinese plan to double down on foreign trade. Many analysts say China's exporting prowess is also the result of government policies that disadvantaged households, leading to imbalances such as manufacturing overcapacity, slow domestic consumption and roads and bridges built to nowhere. China's "mercantilism has led to financial repression, offering households low returns on savings to create cheap finance for favoured industries," said Shamik Dhar, senior adviser at Fathom Consulting. "This has fuelled rapid economic growth but also capital misallocation, property speculation, and financial sector fragility." MORE STIMULUS? Analysts expect Beijing to announce more stimulus soon. The measures could range from central bank interest rate cuts and liquidity injections to exporter tax rebates, property market support and perhaps even higher budget deficit and debt issuance than flagged at an annual parliament meet in March. Last month's "restrained" stimulus measures "were a calculation, not an oversight," said Ruby Osman, China expert at the Tony Blair Institute for Global Change. "Beijing has purposefully kept more in reserve." A second policy adviser said cutting the funds banks are required to hold as reserves and reducing lending rates should be a priority for the second quarter, while more fiscal stimulus might come in the third. "Without this Plan B, it is unlikely for China to reach the roughly 5% growth target this year," the adviser said. "What's more, the finance ministry should prepare Plan C if Trump further hikes tariffs against China." But key to mitigating growth and deflationary risks is what policies Beijing has in store to boost consumption, analysts said. China has been pledging for more than a decade to shift its economic model away from investments and towards consumption-led growth. In parliament, its leaders made those promises even more loudly, without unveiling significant structural measures. Global trade disruption makes those even more urgent, analysts said, although hopes for major structural reform remain low, in view of how painful that transition is likely to be. Subsidies for consumer goods purchases and more support for childcare are possible, but broader welfare reform and radical changes to the tax system, land liberalisation and other policies to redirect resources to households from the state sector remain unlikely. "We'll likely see a doubling down on efforts to encourage domestic demand as a way to offset this expected shock to external demand," Nick Marro, principal economist for Asia and lead for global trade at the Economist Intelligence Unit. "But there's only so much the Chinese government can do."
