This next story is a natural outcome in the flow of goods. Remember, the Bureau of Economic Analysis (BEA) of the first quarter is a hindsight review. Meaning the information released today was based on activity in January, February and March 2025.
U.S. companies surged the purchasing of import goods, mostly from China, by more than 50% in the first quarter. They were/are building inventory. So, what happens in China starting in April?
Hong Kong, CNN – China’s factory activity contracted at its fastest pace in 16 months in April, as steep US tariffs took a heavy toll on the manufacturing sector, adding urgency to Beijing’s efforts to roll out fresh economic stimulus.
The manufacturing Purchasing Managers’ Index (PMI) fell to 49.0 in April, the weakest reading since December 2023, according to data released by the National Bureau of Statistics (NBS) on Wednesday. A reading below 50 signals a contraction.
Zhao Qinghe, a senior statistician at the NBS, said in a statement that the contraction in factory activity was due to “sharp changes in the external environment and other factors.” (read more)
The U.S. has front-loaded the inventory. So, orders to China drop now. It’s a natural outcome.
We have purchased goods in advance. So, orders to China drop. As a result, the cargo shipments from China to the USA drop in April, May and June.
It’s not that U.S. consumers don’t have the product to purchase; the reality is the product is already here, awaiting purchase.
However, to retain an oppositional perspective toward Donald Trump, the media narrative will not look back at the 50% surge in first quarter purchases; they will only look at the severe drop in second-quarter orders.
With less being ordered, the media will now say the Trump tariffs are hurting consumers, deliveries to ports are substantially less, without ever mentioning the products are already here.
On the upside, there will be a massive rebound in Second Quarter GDP as the imports have dropped; meaning there is less to deduct. However, we will not see that statistically until the last Friday in July.
[…] Chinese Foreign Minister Wang Yi dismissed calls for a negotiated tariff truce with Washington, saying appeasement in the face of US threats will only “embolden the bully.” His comments on the sidelines of a meeting in Rio de Janeiro echoed the message in a striking social media video shared by his ministry calling on the international community to stand up to America’s “bully” leader.
In an interview that aired on Tuesday, Trump said China “deserved” the 145% tariffs that he imposed, claiming Beijing would absorb them.
“China probably will eat those tariffs. But at 145, they basically can’t do much business with the United States,” he said in an interview with ABC News.