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China’s Factory Contraction Eases in May as U.S. Tariffs Are Temporarily Reduced

The PMI rose to 49.5 on temporary tariff cuts to 30%, with companies reporting renewed foreign orders despite levies that exceed pre-2017 levels.

Workers work on a production line, manufacturing tank containers at a factory in Nantong, Jiangsu province, China April 7, 2025. cnsphoto via REUTERS/File photo
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Overview

  • China’s purchasing managers index climbed from 49.0 in April to 49.5 in May, narrowing the factory downturn for the second month in a row.
  • The overall manufacturing index showed sector expansion even though the neworders subindex remained below the 50 cutoff for growth.
  • Under the 90-day deal, U.S. duties on Chinese goods fell from 145% to 30% and China cut its tariffs on U.S. imports from 125% to 10%.
  • National Bureau of Statistics senior statistician Zhao Qinghe said companies with U.S. business have accelerated the resumption of foreign trade orders.
  • Uncertainty over the tariff truce’s longevity has grown after President Trump warned he may end the deal and U.S. visa revocations for Chinese students escalated tensions.