This trade war is already hitting China's factory output. Good morning. This is the Marketplace Morning Report and we're live from the BBC World Service. I'm Leanna Byrne. So let's start in China where new data shows manufacturing activity took a sharp dip in April. It's a sign that the ongoing trade war with the US is starting to bite. The BBC's

Nick Marsh is going to tell us what's behind the numbers. Hello, Nick. Hi, Leanna. Nick,

just how much of this drop in manufacturing activity is directly tied to the tariffs? And also,

what does that tell us right now about the state of China's economy? Well, it's very much tied to the tariffs.

Maybe not in the way you might think.

So this is the purchasing managers index, managers factory activity.

There was this contraction, this slowdown in output in April.

The caveat, though, is that March saw the highest PMI in a year because basically

there was this flurry of exports as manufacturers rushed to ship out goods to the United

States just before the tariffs kicked in this month. That's why there was a drop in part,

so kind of connected to the tariffs, if that

makes sense. But in any case, the drop was even sharper than expected. So it shows that even

at this early stage, these incredible 145% US tariffs are having an effect on Chinese manufacturers.

I guess for American businesses as well,

especially importers or retailers, are they going to start feeling this drop in Chinese factory

output? Yeah, I think you ask any analyst, any economist, the first thing they'll tell you is that

tariffs increase prices. Someone's got to pay that

along the line and it'll pretty much always be the consumer. In terms of a drop in output,

I mean, it's kind of tied to how many willing buyers there are, you know, and if Chinese goods

then become very, very expensive for American exporters, then fewer goods are going to be produced.

At the same time, China has this enormous manufacturing capacity.

They are going to want to continue producing goods, and they're going to have to sell these goods somewhere, eventually.

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