President Donald Trump has taken a lot of heat over his imposition of tariffs against China in a bid to level the trading field between both countries, but there is new evidence that his tactics are producing results favorable to America.
For the first time in recent memory, Chinese manufacturing actually fell in December, according to the Caixin manufacturing purchasing managers’ index, which mainly tracks private factories.
The index slipped from 50.2 in November to 49.7 in December; any measure below 50 is considered a contraction. The private PMI has measured above 50 since May 2017.
The purchasing managers’ data comes just two days after China’s official purchasing manufacturing index, which is mainly based on state-owned businesses, fell to 49.4. That was the first contraction for this index since July 2016.
The two PMI figures suggest that the Chinese economy is on an even weaker footing than many economists expected. Domestic demand appears to be falling and U.S. tariffs are weighing on the world’s second-largest economy.
The lower than expected figures dragged down global stocks, pulling share prices down in Hong Kong, Shanghai, and Japan. U.S. futures indicate the major indexes in the U.S. will also likely open lower.
U.S. markets have taken a beating as well; December produced the worst results in months.
Some of the decline has been blamed on Federal Reserve Chairman Jerome Powell’s rate four rate hikes since September absent any real signs of inflation. But some market analysts have also blamed uncertainties created by the ongoing trade war.
Still, the U.S. economy appears healthy, growing at 4.2 percent in the second quarter and 3.5 percent in Q3.
As for China, its leadership is aware of the slowdown. Beijing is now promising tax cuts and monetary easing. In addition, Chinese trade negotiators have re-engaged with their American counterparts in a bid to stave off an additional $200 billion in tariffs on Chinese-made goods by March if no progress is made.
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