China's Manufacturing Slump and U.S. Tariff Easing in May 2025: Export Decline and Beijing's Massive Stimulus
In May 2025, China's economy faces dual challenges of a manufacturing slowdown and declining exports. Although the U.S. eased tariffs, offering short-term relief, long-term recovery remains uncertain. Below is a summary of the latest economic indicators and policy developments.
📉 China’s Manufacturing PMI Remains Below 50 for Two Consecutive Months
According to China’s National Bureau of Statistics, the manufacturing Purchasing Managers' Index (PMI) in May 2025 stood at 49.5, slightly up from April’s 49.0 but still below the 50 threshold for the second month in a row, signaling contraction.
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Large enterprises: 50.7 (expansion)
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Medium enterprises: 49.3 (contraction)
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Small enterprises: 47.5 (deep contraction)
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New orders: 49.8
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Raw material inventory: 47.4
The weak figures are attributed to both internal demand stagnation and the ongoing uncertainty of U.S.-China trade relations.
“While the May PMI rebounded slightly to 49.5, it's too early to call it a recovery. External and internal uncertainties remain.”
— ForexLive, May 31, 2025[1]
🇺🇸 U.S. Tariff Easing Softens Economic Impact…Down to 30%
In early 2025, the U.S. imposed tariffs of up to 145% on Chinese imports. However, following a trade truce in May, most tariffs were reduced to 30%.
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Projected average tariff without easing: 27.6% (highest since 1903)
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Current average tariff: 17.8% (highest since 1934)
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U.S. GDP impact reduced: -1.1%p → -0.7%p
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U.S. tax revenue gain over 10 years: +$300 billion more than high-tariff scenario
This easing relieves cost burdens for U.S. firms dependent on imported materials and intermediate goods[2][6].
🌍 Sharp Drop in Export Orders Deepens Global Trade Pressure
In April 2025, China’s new export orders index fell sharply to 44.7 from 49.0 in March, indicating significant weakening of overseas demand due to U.S. tariffs and global trade tension.
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Export orders index: 49.0 → 44.7
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Export volume outlook (2025–2026): -5% annually (Goldman Sachs)
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Trade surplus to GDP ratio: 4.0% (2024) → 3.7% (2025)
This trend threatens the profitability and employment levels of China’s export-reliant sectors[3].
🏦 China Unveils Massive Stimulus to Secure 5% Growth Target
To defend its growth goal of around 5%, China launched one of its most aggressive economic stimulus packages since the pandemic.
Monetary Measures
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Reserve requirement ratio cut by 0.5%p (1 trillion yuan liquidity injection)
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7-day reverse repo rate lowered by 0.15%p (now 1.85%)
Fiscal & Consumer Support Measures
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200 billion yuan stock market stabilization fund
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500 billion yuan in consumer credit stimulus
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300 billion yuan technology investment fund
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0.5%p interest rate cut on existing mortgages
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15% subsidy for digital device replacements under 6,000 yuan
“This stimulus package is the strongest since the COVID era, with focused funding for consumption and innovation.”
— DiscoveryAlert, May 9, 2025[4]
📌 Summary
As of May 2025, China’s manufacturing sector remains in contraction, and export momentum has faltered due to high U.S. tariffs and weak global demand. While Washington's tariff reduction and Beijing’s massive stimulus offer temporary relief, structural issues like weak consumption and the real estate downturn persist.
This situation continues to raise uncertainty for both China’s domestic economy and the broader global economic outlook.
References
[1] ForexLive, China May Manufacturing PMI Report (May 31, 2025)
https://www.forexlive.com/news/china-may-manufacturing-pmi-rose-to-495-prior-490-non-manufacturing-503-prior-504-20250531/
[2] China Briefing, 2025 U.S.-China Tariff Status (May 23, 2025)
https://www.china-briefing.com/news/us-china-tariff-rates-2025/
[3] Goldman Sachs, China Export Outlook (May 5, 2025)
https://www.forexlive.com/news/goldman-sachs-sees-chinese-exports-declining-through-2025-2026-20250505/
[4] DiscoveryAlert, China Economic Stimulus Analysis (May 9, 2025)
https://discoveryalert.com.au/news/china-economic-stimulus-package-2025-trade-recovery/
[6] CEPR, Global Impact of 2025 U.S.-China Trade War (Mar 28, 2025)
https://cepr.org/voxeu/columns/roaring-tariffs-global-impact-2025-us-trade-war
