China's export orders plunge

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.wsj.com/world/china/china-pmis-signal-weaker-than-expected-manufacturing-activity-543d7108?mod=hp_lead_pos1

China’s Export Orders Plunge, Hit by Trump’s Trade War

Steep U.S. tariffs start to squeeze Chinese economy

By Jason Douglas, The Wall Street Journal, Updated April 30, 2025

  • China’s manufacturing activity weakens amid rising U.S. tariffs, hitting export orders hard in April.

  • China’s PMI fell to 49, signaling contraction, while new export orders hit their lowest since December 2022, when China shut down due to Covid.

Beijing faces pressure to boost stimulus and negotiate with the U.S., but remains defiant despite economic strain.

A similar measure of new export orders plunged even more steeply, sinking to 44.7 in April, the lowest reading since December 2022, an early sign that trade between the U.S. and China is in danger of drying up as American importers cancel or delay orders after a rush to bring in goods earlier this year before tariffs came into effect… [end quote]

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https://www.wsj.com/economy/us-gdp-q1-2025-1f82f689?mod=WSJ_home_mediumtopper_pos_1

U.S. Economy Contracts at 0.3% Rate in First Quarter

The reading fell short of the 0.4% growth that economists surveyed by The Wall Street Journal expected

By Harriet Torry, The Wall Street Journal, Updated April 30, 2025

…
Net exports, the difference between imports and exports, were a large drag on growth in the first quarter, stripping 4.83 percentage points from headline GDP. Imports increased at a 41.3% pace in the first quarter as businesses tried to get ahead of tariffs that began to come into effect during the first three months of the year and were dramatically increased in the current, second quarter… [end quote]

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The stunning drop in net exports is entirely due to the new tariffs. The buildup of inventory is an attempt to keep goods on the shelves but in time they will be purchased and shelves will be empty.

China’s export orders are plunging but this means that customers won’t be receiving the goods they would have ordered.

It will take time for this situation to develop fully. If things progress further the supply chains will dry up as they did during Covid in 2020-2021.

The economy is already slowing. Classic recessions take a while to develop as manufacturers (and services like UPS) lay off workers who then spend less.

The stock market is in a bubble. The young generation hasn’t seen an old-fashioned (non-Covid) recession since the last bubble burst in 2008. They will be blindsided.

The question in my mind is whether the recession will be accompanied by a financial crisis (which is separate from a stock market crash).
Wendy

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Why are you convinced there will be a recession? You don’t seem to allow for the possibility that we wont have one.

The front-running first quarter massive imports will not be repeated. And, some of that may still be included in investments (inventories) in the second quarter.

Personally, I think there is a decent chance we won’t have one. I think 2nd quarter GDP will be flat but positive (not that the official definition of recession requires two consecutive negative quarters, but it helps) and if we don’t see a substantial increase in unemployment, I am not convinced we will have one - EVEN IF the market sells off regardless. Keep in mind that market can sell off dramatically (see 2022) even when GDP and unemployment are good.

I think the unknown part of this will be consumer spending and I don’t think we will see that drop off until the 3rd quarter.

Hawkwin
Who has the best navel lint.

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“You can’t go broke as long as you can pay your bills.” This is my fundamental economic belief.

The 1929 market crash was fueled by margin debt. If I’m not mistaken you could buy stocks on 10% down, 90% margin.

A well respected economist posited during the dot-com bubble that it did not matter where the money came from as long as the money was available. In other words, profits didn’t matter as long as there was venture and angel capital. That didn’t pan out.

The 2008 crisis was fueled by real estate people could not afford, excessive debt.

Bad times that can be survived by tightening belts do not end in crisis.

I started in Data Processing (now IT) in 1960, very early in the computer age. In Venezuela we had a dozen or so computers, oil companies, government, IBM & Remington Rand, and one private company.. The future looked bright. Now there are billions of computers most living in peoples’ back pockets.

The reborn neural network based AI promises magnitudes greater prosperity. Hard times? Maybe. A serious recession? Not likely. Just make sure you can pay your bills.

The Captain

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I allow for the possibility, but I’m pretty sure we are going to have one. Whether it is deep or shallow is a different thing, and I have no opinion on that.

Big time, hairy recessions come as a result of sudden, unanticipated external forces: Covid, banking collapse (and subsequent credit lockup), OPEC embargo. Other recessions are milder, and can result from the simple mismatch of the economy’s wonts and desires. One sector (or two or three) get ahead of itself and then realize “oops, problem” and collapse in, like the tech bubble deflation of 1999. There was no big problem with housing, with food, with credit, with banking, or anywhere else, yet the psychological trauma of the bubble collapse made everybody pull in their spending some, and presto: the economy shrinks.

Now that one didn’t last long, and neither did the one at the end of GW Bush’s term, and perhaps that’s what we will have. But the economy powers forward when everything is working smoothly, like a gas engine where you can hear the cylinders effortlessly doing their job.

Then comes a piece of crud in the carb (tariffs, maybe) and everybody does a hurry up to beat them. Now warehouses are stuffed, so stores are OK for a while, but docks are empty and dockworkers are laid off. Truckers are in less demand, and they stop spending so lavishly. The tourism business dives because nobody wants to come here from abroad anymore, and the airlines cut back and hotels and theme parks and what not cut back, and now you’re looking at hundreds of thousands of people not working, not spending, and the engine isn’t running smoothly anymore.

That lump in the soup will smooth out, eventually, but that’s how a smaller recession happens. Those used to spiral downward into larger ones, but the Fed decided many decades ago to combat this cycle by easing money and doing other things to keep things running. Hopefully that’s what happens this time too, but the “shock” may or may not be big enough to bring things to a halt (temporarily.)j

Yes, serious chance of a recession this year. Wall Street thought 1st quarter would be plus 0.4%, turns out it was down 0.3%. I’m not sure I see how Q2 does better.

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Then I recommend you read the details. The disparity between exports and imports decreased GDP by 4%. Imports were up by nearly 50% (Goods were up over 50%) . We’ve not had that level of disparity since Q3 2020 when imports were up 100% because basically nothing had come in prior.

I don’t disagree that there is a serious chance of a recession but I think the opposite is true, that there exists just as much, if not more likelihood that we don’t have one.

Hawkwin
Who will remind readers that we had -1.0% GDP in Q1 2022, followed by 0.3% GDP in Q2 2022, without a recession being declared. This could be something very similar.

Edit:

From GDPNow:

The initial GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2025 is 2.4 percent on April 30

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The wild card here is why imports were up so much: People are afraid. They are buying stuff because the expect the economy will be bad. Consumer sentiment in its various forms is in the dumps. It is self-reinforcing. People stop spending because they are worried about the economy, which causes the economy to slow down, which causes people to worry about the economy.

If consumer confidence is bad now, what will happen when people start to feel the effect of the tariffs?

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The gdp w out imports was up supposedly.

People were preparing for empty shelves. The rise gdp sans imports is nonsense

We are in for a great depression

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I don’t think that is accurate. People don’t import, companies do. People might buy direct but we don’t import.

Then it is probably a very good time to invest. Consumer sentiment is a strong contra indicator when it is negative.

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You could be right. March 2009 and March 2020 were two epic times to invest despite the news being the blackest.

But I was referring to the economy. We haven’t really felt the effects of the tariffs yet. When certain products get scarce and prices go up, people will get really nervous.

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That is the thing. When to we reach peak hysteria? Do we reach peak hysteria, entirely on media hype, before anything actually happens? Or do we reach peak hysteria when reality hits. The media stoked TP hysteria manifested itself in empty shelves in a matter of days. Are we at peak hysteria now, when people are stockpiling/hoarding?

Steve…watching the lemming stampede

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I know two people who bought cars to beat the tariffs. They were planning for later in the year (or next year) but both moved up and bought.

Hard to imagine that happening on a scale of someone buying a coffee pot at WalMart, but I suppose there could be a little of that. More likely it’s distributors cramming warehouses full, and they will work off the excess over the next few months.

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Animal Spirits!!

I “worked” as an apprentice “cowboy” (glorious term for a boy watching various cows and sheep in a set of connected bottom land meadows in the foothills of the Rocky Mountains) at Philmont Boy Scout Ranch

one glorious young teenage summer. My very experienced ancient instructor pointed out

a strange look in the clear blue sky overhead (weirdly darkening here and there)
distant dark clouds a mile or so to our northwest, over a crest of the Rockies
and warned me that a “bolt from the blue” might be coming, spooking the animals.

The cows were sensing something, and starting to “low” a bit.
The sheep were oblivious.
And then, about a half mile down canyon from us.

A couple of cows startled and took off, but the rest were more like “whaaaat?” and then went back to grazing. The sheep did not seem to give a damn.

I had my one glorious moment as a cowboy, taking off down canyon to “head off” the frightened cows and bring them back to the herd.

Animal Spirits are somewhat random.

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Quick update, I read this morning that the net export gap (difference between imports and exports) was THE LARGEST in recorded history.

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Which is why, as discussed in another thread, the GDP print was negative.

DB2

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Says no one in business planning:
“What we most need our business environment to be like is the tallest, steepest, fastest roller coaster ever. And don’t tell us what the ride will be like. Surprise us!”

Except perhaps some working in options trading.

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Dear Bob,

Whose fault is that?

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What is your point?

You respond as if you think I see ANY of this as a good thing. I absolutely do not. But, my view and opinion is nuanced enough to say that all this sucks, but not necessarily so much that we will have a recession.

As I stated yesterday or the day before, it takes someone really special to undo the strong economy we had at the end of 2024 and despite his best efforts, I don’t think the POTUS up to the task.

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If our corporate tax rate was higher Apple would not turn to India at all.

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My point is about the current business climate (which is also the content of your post), nothing more.

My post says nothing about what I think you think or see, or at least certainly was not intended to.

(Ah, the written word, so precise yet so incomplete.)

I avoid posting claims about what people are thinking, feeling (or at least I try/intend to avoid).

I wouldn’t presume to know, unless someone posts “I think…”

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I think the current environment is far too unstable for me to predict what will happen. There are all sorts of abnormal things going on. Here’s an example -

https://www.reuters.com/world/middle-east/wlfs-zach-witkoff-usd1-selected-official-stablecoin-mgx-investment-binance-2025-05-01/

““We are excited to announce today that USD1 has been selected as the official stablecoin to close MGX’s $2 billion investment in Binance,” said Witkoff, who is a son of Trump’s special envoy to the Middle East, Steve Witkoff.”

Lots of shenanigans lining the pockets of some really shady characters. USD1 being backed by US treasuries makes me nervous. I feel angry.

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