China Faces Manufacturing Exodus as Trade War Takes It Toll

The trade war has hurt the Chinese economy, with manufacturing particularly hard-hit. Higher tariffs have triggered a manufacturing exodus, which could have negative ramifications for the global economy.
Kenny Fisher
Asian Stock Market

The ongoing trade war between the U.S. and China has had immense ramifications, as global economic growth has slowed. The U.S. and China, the two largest economies in the world, have not been spared from the economic fallout. Both countries have seen exports decline and the manufacturing sector contract, which has hurt economic growth.

The ‘Chinese miracle’ of tremendous economic expansion has slowed down since the trade war began in July of 2018, and China has been hit by a manufacturing exodus. The imposition of higher U.S. tariffs on Chinese goods has been a major factor, but rising labor costs and a complex regulatory environment have also led to manufacturers looking for greener and cheaper pastures.

How bad is the situation for China? Prior to the trade war, China was the largest trade partner of the United States. Currently, it has fallen behind Mexico and Canada and has fallen to third place. China’s export sector has been hard hit, as exports to the U.S. plunged by 20 percent in November on an annualized basis, and have fallen to their lowest level since March 2013. Meanwhile, the U.S. has been importing goods from countries which have played host to manufacturers that were formerly based in China. These include Vietnam, Thailand, Taiwan and Mexico, all of whom are delighted to welcome these companies.

There has been a lot of fanfare over the ‘Phase 1’ agreement between China and the U.S., which will be signed next week. However, the deal is limited in scope and is unlikely to sway manufacturers who are contemplating relocating outside of China. If the manufacturing exodus continues, China could experience a significant economic slowdown, which would have a negative impact on the global economy.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.