Chinese Manufacturing Tumbles as Tariffs Bite

Summary

WSJ What’s News: Chinese Manufacturing Tumbles as Tariffs Bite
Release Date: April 30, 2025
Host: Luke Vargas

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Introduction

In this episode of WSJ What’s News, host Luke Vargas delves into the pressing issues stemming from the ongoing trade war between the United States and China, highlighting the significant downturn in Chinese manufacturing. The episode also covers President Donald Trump's 100-day mark in office, his stance on tariffs, and innovative moves by companies like Starbucks to enhance customer experience through technology.

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China's Economic Struggles Amid Trade War

Decline in Manufacturing and Exports

The trade war's detrimental effects on China's economy are substantiated by newly released data showing a sharp decline in manufacturing activity and export orders for April. Jason Douglas, a Wall Street Journal reporter based in Tokyo, provides an in-depth analysis:

• Contraction in Manufacturing: "There was a contraction in manufacturing activity down to the worst reading for I think about a year, maybe about 18 months," Douglas explains at [01:33].

• Export Orders Plummet: Export orders have fallen to their lowest since the end of 2022, marking the worst performance since 2012 when China was still grappling with COVID-19 disruptions.

• Employment Weakness: The manufacturing sector is also experiencing weaknesses in production and employment, indicating broader economic challenges exacerbated by the trade war.

Implications for China's Economy

Douglas outlines the broader implications:

• Reduced Growth reliance on Trade: "About a third of its growth last year came from trade where previously it has had much stronger domestic spending," he notes at [02:22].

• Job Risks: Goldman Sachs estimates indicate up to 20 million jobs in Chinese factories that export to the U.S. are at risk.

• Slower Growth Projections: Capital Economics forecasts China's growth at 3.5% for the year, significantly below the government's 5% target.

Douglas raises critical questions about China's ability to stimulate domestic spending and reorient its economy to mitigate future vulnerabilities.

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Impact on the U.S. Economy and Financial Markets

U.S. GDP and Trade Negotiations

As China's economic indicators reveal strain, attention turns to the U.S. economy:

• First Quarter GDP: The release of the U.S. first-quarter GDP reading at 8:30 AM Eastern is highly anticipated to assess the trade war's toll on the American economy.

• Trade Negotiations Progress: Speculation surrounds potential progress in trade negotiations, following a recent rally in the S&P 500 spurred by hints of a trade deal with an unnamed country, marking a positive note amidst economic uncertainties.

Stock Market Dynamics

Katie Barnado, the Journal Markets editor, provides insights into the equity market's behavior:

• Uneven Recovery: "Over the last few days we have seen an interesting recovery in stocks on hopes that perhaps the trade war won't turn out as badly as feared," Barnado states at [03:57].

• Tech Stocks Rebound: Major technology companies like Apple have shown notable resilience and rebounding performance despite significant exposure to the Chinese market.

• Industrial and Consumer Discretionary Gains: Traditional industrial and consumer discretionary stocks are outperforming as investors seek stability amid fears of an economic slowdown.

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Corporate Innovations and Earnings Highlights

Starbucks' Technological Advancements

Starbucks is taking proactive steps to address customer concerns about long wait times:

• Order Scheduling Algorithm: A new technology pilot involving a proprietary order scheduling algorithm has successfully reduced average drink preparation times by two minutes in dozens of U.S. locations ([04:42]).

• Expansion Plans: Encouraged by the pilot's success, Starbucks plans to roll out the technology to hundreds more locations in an effort to boost sales following five consecutive quarterly declines.

Tech Industry Earnings

The episode highlights significant earnings reports from leading technology firms:

• Samsung's Strong Performance: Despite challenges from U.S. restrictions on advanced chip exports to China, Samsung reported stronger-than-expected first-quarter profits, driven by robust smartphone sales that offset weaknesses in the semiconductor sector ([04:42]).

• Upcoming Reports: Investors are keenly awaiting quarterly results from Microsoft and Meta, which are set to release their earnings after the market close.

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President Trump's 100-Day Milestone

Rallying Support and Policy Focus

Marking his 100th day in office, President Donald Trump has been actively promoting his administration's achievements:

• Rally Speech: "Back in the White House, America is a free, proud and sovereign nation once more and our magnificent destiny is closer than ever before. It's closer than ever before. You have no idea how close it is," Trump proclaimed during a rally in Michigan at [06:45].

Global Trade Agenda

Alex Leary, a White House reporter, discusses Trump's aggressive approach to reshaping global trade dynamics:

• Trade Reordering: "He's kind of sought to reorder the global trading order and he has accumulated a pile of unresolved issues with dozens of countries, including China," Leary explains at [07:10].

• Strained International Relations: Trump's confrontational tactics have strained relationships with allies in Europe and Canada, and have caused friction over issues like Ukraine and Greenland ([07:52]).

Domestic Policies and Immigration

Trump's domestic agenda, particularly on immigration, remains a focal point:

• Southern Border Enforcement: Significant reductions in illegal crossings have been achieved, yet millions remain in the country illegally. Efforts to enhance internal immigration control are impeded by funding shortages and political challenges ([09:21]).

• Legislative Efforts: Proposed tax legislation aims to allocate more resources for immigration enforcement to expedite deportations ([09:21]).

Voter Sentiment and Political Implications

Voter reactions to Trump's first 100 days reflect a complex landscape:

• Mixed Confidence: While core Republicans remain steadfast, independents and moderates show growing hesitation, potentially impacting midterm elections ([10:19]).

• Economic and Policy Challenges: Fluctuations in the stock market, controversial policies, and aggressive agenda pacing have led to reduced support among swing voters, posing challenges for the Republican Party ([10:19]).

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Conclusion

As the trade war continues to cast a shadow over both the Chinese and U.S. economies, the political landscape remains volatile with President Trump's assertive policies influencing domestic and international relations. Meanwhile, innovative corporate strategies, such as Starbucks' technological initiatives, highlight ongoing efforts to adapt and thrive amidst economic uncertainties. The coming weeks will be critical in assessing the long-term impacts of these developments on global markets and political dynamics.

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Notable Quotes:

• Donald Trump ([00:37]): "Back in the White House, America is a free, proud and sovereign nation once more and our magnificent destiny is closer than ever before. It's closer than ever before. You have no idea how close it is."

• Jason Douglas ([01:33]): "Frankly, things are not going well."

• Katie Barnado ([03:57]): "Over the last few days we have seen an interesting recovery in stocks on hopes that perhaps the trade war won't turn out as badly as feared."

• Alex Leary ([07:10]): "Trade is going to be very dominant in these next hundred days and beyond. It's going to really test the determination and the skill of his negotiating teams."

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This summary was produced based on the transcript and information provided from the April 30, 2025 episode of WSJ What’s News.

Transcript

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[Luke Vargas]

Warning signs for China's economy as trade war damage begins hitting home Plus President Trump talks up his tariffs even as voters economic concerns mount after 100 days.

[Donald Trump]

Back in the White House, America is a free, proud and sovereign nation once more and our magnificent destiny is closer than ever before. It's closer than ever before. You have no idea how close it is.

[Luke Vargas]

And Starbucks turns to tech to tackle unpopular in store wait Times. It's Wednesday, April 30th. I'm Luke Vargas for the Wall Street Journal and here is the AM edition of what's news, the top headline and business stories moving your world today. The proof of the trade war is in the numbers. Beijing released fresh data on export orders and factory production for April overnight, with neither indicator able to hide the damage that tariffs are causing to the engine of China's economy. Journal reporter Jason Douglas joins me now from Tokyo. Jason, these readings don't seem all that hard to parse. Frankly, things are not going well.

[Jason Douglas]

Yeah, that's right, Luke. There was a contraction in manufacturing activity down to the worst reading for I think about a year, maybe about 18 months. It was far worse on new export orders, which after all is a thing we're all watching closely. Those tumbled to the worst it's been since the end of 2022, which was when China was still very much grappling with COVID 19 and lockdowns and so on. And in fact, if you exclude the disruptions around Covid, it's the worst export orders reading since 2012. There was also a weakness in production overall and in employment in the manufacturing sector. So these surveys are point to a bit of difficulty surrounding the trade war.

[Luke Vargas]

Jason, these are readings that seem to validate reports from the US west coast that shipments from China have sharply dropped off, which is I imagine what President Trump wants to see, a weakening of the flow of Chinese goods to the US but where does all of this leave China?

[Jason Douglas]

So China's economy isn't in a great position going into this trade war. About a third of its growth last year came from trade where previously it has had much stronger domestic spending, much stronger investment, much stronger consumption to power growth. Goldman Sachs estimates there are between down to 20 million jobs in China that are at factories that ship stuff to the US So there is quite a lot of risk in terms of jobs. Growth in the first quarter, according to Capital Economics, was probably weaker than the official numbers actually suggested, and they expect growth this year to come in 3.5%, which is much lower than the 5% of the government is aiming for. So there's certainly lots of short term weakness built into the Chinese economy. The big question is, can the government do enough on the stimulus side to really boost domestic spending to offset some of the headwinds from trade and then longer term reorient this economy away from exports so that it isn't so vulnerable in the future?

[Luke Vargas]

That was reporter Jason Douglas in Tokyo, and whether the trade war is also hurting the US Economy will come to the fore later today, with a first quarter GDP reading set for release at 8:30am Eastern. While also on investors radar today, word from Washington on further progress in trade negotiations. The S&P 500 staged an afternoon rally yesterday following comments that one such trade deal had been reached with an unnamed country closing out President Trump's first 100 days in office. On a high note, though, as Journal Markets editor Katie Barnado told me, progress has been uneven across US equities as stocks try and regain ground they'd lost in recent months.

[Katie Barnado]

So over the last few days we have seen an interesting recovery in stocks on hopes that perhaps the trade war won't turn out as badly as feared. And among the notable gainers are the big tech stocks. Most notably Apple are very heavily exposed to China, but of late they have been notable rebounders. Separately, we've seen some outperformances by some of the big old school industrial names or consumer discretionary names. It's more related to, by contrast, fears of a slowdown. These types of companies are traditionally viewed as being stronger bets when the economy is weaker.

[Luke Vargas]

Well, as Katie alluded to, it's shaping up to be another bumper earnings day with big tech front and center as Microsoft and Meta release their quarterly results after the market close. Just this morning, South Korean tech giant Samsung said profit in the first quarter was stronger than expected thanks to solid smartphone sales that offset weak sales semiconductor earnings, which are being hit by US Restrictions on advanced chip exports to China and increased competition in supplying high bandwidth memory products for AI applications. And we are exclusively reporting that Starbucks is using new technology to help fix one of its customers biggest gripes Waiting too long for their coffee. A technology pilot at dozens of U.S. locations has shaved two minutes off the average time to make a drink ordered inside cafes. Starbucks now plans to expand the pilot, which involved a proprietary order scheduling algorithm developed in house to hundreds more locations across the US in the hopes that will boost sales following five consecutive quarterly declines. Coming up, as President Trump celebrates his early accomplishments, we'll hear why voters are now less confident in his ability to deliver on his agenda. We have got that story and more after the break.

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[Luke Vargas]

To mark his hundredth day in office, President Trump returned to the rally stage in Michigan last night, shifting into campaign mode to tout his accomplishments.

[Donald Trump]

This is the best, they say, hundred day start of any president in history. And everyone is saying it. We're just, we've just gotten started. You haven't even seen anything yet.

[Luke Vargas]

Journal White House reporter Alex Leary told our Kate Bullivant that although voters are showing mixed confidence in Trump's handling of domestic priorities like inflation and immigration, the president is plowing ahead and shifting his focus abroad.

[Alex Leary]

Well, foremost on his agenda is trade. He's kind of sought to reorder the global trading order and he has accumulated a pile of unresolved issues with dozens of countries, including China, the big one, which is still hovering over his agenda. So trade is going to be very dominant in these next hundred days and beyond. It's going to really test the determination and the skill of his negotiating teams. It's a high priority for Trump, but it's also fraught with a lot of political complications and potential downsides.

[Kate Bullivant]

And how has this reordering of global trade really impacted US Relationships abroad?

[Alex Leary]

Well, he's come in very hard, very aggressive on his agenda, and that has caused a lot of strain with some of our allies, especially in Europe, who are kind of looking at Trump's view towards Ukraine. He's famously squabbled with Zelensky and threatened to cut off aid. A lot of European leaders are not happy with that approach. So Trump's been very disruptive to their attempts to sort of corral Russia. He's also kind of picked some fights, including with Canada, joking or not joking about trying to absorb that into becoming the 51st state. That has engendered a lot of distrust and backlash in Canada. And he's also made moves on acquiring Greenland or at least taking some control. That's roiled a lot of our traditional allies who were not keen to see such an aggressive move. He's proven himself to be divisive, but also very determined to achieve his goals. And so it's very tumultuous time on the world stage. And that's going to just increase now as he's got to take on trade deals and deal with China. And also, let's not forget that he's also trying to work to find an end to the fighting in Gaza. That's another frustration of Trump's that that's lingered on and that's caused some pain on the world stage as well.

[Kate Bullivant]

So, with a lot of his attention being pulled beyond America's borders, where does that leave his domestic agenda, especially things like immigration?

[Alex Leary]

Yeah, Trump has put a lot of focus on immigration. It was one of the major issues of the campaign, and he's followed through with a very aggressive effort on the southern border. People crossing illegally into the country is really dried up. So that's a success for Trump and his administration. They're very proud of those numbers. However, internally, there's millions of people living in the country illegally, and those efforts have not been as robust for Trump. They've lacked some funding. And also, it's politically treacherous at times to target. Target people that have lived in the country for a long time. So part of the tax legislation that's moving its way through Congress would free up a lot of money for internal immigration control. They need a lot more money to fund the efforts to find and deport people currently living in the US So that's a big thing for Trump. If they can get that money, that would speed up deportations.

[Kate Bullivant]

And, Alex, how have voters been reacting to his first 100 days in office?

[Alex Leary]

Yeah, Trump came into office with pretty solid numbers. Obviously, Republicans were extremely excited to see him return. There were a lot of independents and others who supported Trump. And so he came in sort of feeling very bullish. He was promising a new golden age. And in the 100 days since then, some of that shine has come off as Trump contends with a stubborn economy. We've seen a lot of gyrations in the stock market over some of his trade policies, and then, of course, the immigration efforts. And also, Elon Musk and Doge have proven pretty controversial. A lot of Americans are just sort of whipsawed by the pace and the ferocity of Trump's agenda, and it has led to some weakening of his support and polls. Now, core Republicans are very much aligned behind Trump, but independents and others who will be critical in midterm elections are starting to show some hesitation, if not regret, for backing the president. So that's a concern for Trump and Republicans as they head into the midterm season. But Trump so far is determined to plow ahead and do it in a noisy way that sometimes disregards the critics that want to see a more measured approach to government.

[Kate Bullivant]

Okay, so lots to watch out for going forward. Alex, thanks so much for breaking this down for us.

[Alex Leary]

My pleasure.

[Luke Vargas]

And that's it for what's news for this Wednesday morning. Today's show was produced by Kate Bullivant and Daniel Bach. Our supervising producer is Sandra Kilhoff. And I'm Luke Vargas for the Wall Street Journal. We will be tonight with a new show. And until then, thanks for listening.