China’s services sector experienced its slowest growth in seven months this April, as escalating US tariffs dampened business sentiment and hiring plans. According to Reuters, the Caixin/S&P Global Services Purchasing Managers’ Index (PMI) fell to 50.7 from March’s 51.9, marking the lowest reading since September. A PMI above 50 indicates expansion, while below 50 signifies contraction.
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This deceleration aligns with the official survey, which reported a slight dip in services activity to 50.1 from 50.3 the previous month. The Caixin PMI is often viewed as a more accurate reflection of trends among export-oriented and smaller firms.
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Despite stronger-than-expected economic growth in the first quarter, bolstered by government stimulus, China’s economy faces persistent deflationary risks, a prolonged property slump, and mounting challenges from US tariffs. In 2023, approximately 48 per cent of China’s workforce was employed in the services industry, which contributed 56.7 per cent to the nation’s GDP. However, the ongoing trade tensions have begun to weigh on business hiring plans and consumer confidence.
“With a cloud over the market outlook, both business and consumer confidence are subdued, making it harder to boost domestic demand,” said Wang Zhe, Senior Economist at Caixin Insight Group, as reported by Reuters. “The ripple effects of the ongoing China-US tariff standoff will gradually be felt in the second and third quarters. As such, policymakers should prepare well and take action sooner rather than later,” he added.
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The Caixin services survey indicated that new business growth slowed to its weakest since December 2022, though export orders saw a slight uptick, partly due to a recovery in tourism. Some service providers cited disruptions from US tariffs impacting goods trade.
Business sentiment in the services sector grew at the slowest pace since February 2020, with companies identifying US tariffs as a significant concern. To curb costs, service providers reduced jobs for the second consecutive month, leading to a rise in backlogged work and pushing the corresponding gauge into expansionary territory for the first time this year. Firms also cut prices to attract customers, despite facing higher input costs.
The Caixin China General Composite PMI, which combines both manufacturing and services activity, fell to 51.1 in April from 51.8 the previous month.
In response to these challenges, China’s ruling Communist Party’s Politburo pledged last month to support firms and workers most affected by the impact of triple-digit US tariffs and urged the country to prepare for worst-case scenarios. Economists at Morgan Stanley projected that second-quarter growth could slow by one percentage point as tariffs take effect. They anticipate that Beijing will navigate these challenges with cautious and uneven stimulus policies, relying on investment in emerging sectors and urban renewal, while gradually shifting policy towards consumption over the medium term.
The ongoing trade tensions have also impacted other sectors. For instance, Hong Kong’s freight forwarding industry is experiencing significant disruptions, with 41 per cent of container capacity to North America’s west coast canceled for the week starting May 12, according to the South China Morning Post, as reported by Reuters. This highlights the broader economic implications of the US-China trade war, signaling further turbulence ahead for both regional logistics and global trade infrastructure.
The US-China trade talks
 
In April 2025, President Donald Trump escalated the trade conflict with China by imposing a 145 per cent tariff on Chinese imports, citing concerns over trade imbalances and national security. In retaliation, China levied a 125 per cent tariff on US goods, triggering a sharp downturn in bilateral trade.
Despite the friction, both countries have signalled cautious interest in returning to the negotiating table. China’s Ministry of Commerce said it is “evaluating” Washington’s outreach for potential tariff talks but rejected any form of intimidation. Trump, meanwhile, reaffirmed he would not drop tariffs just to resume dialogue, demanding what he calls a “fair and reciprocal” trade deal.
On May 5, 2025, China’s Ministry of Commerce issued a firm rebuttal to US pressure tactics. Ministry spokesperson He Yongqian stated, “Pressure, threats and blackmail are not the right way to deal with China. We hope that the two countries will meet each other halfway and work towards resolving differences through dialogue and consultation, guided by the principles of mutual respect, peaceful coexistence and win-win cooperation.”
He added that if the US insists on pursuing a trade war, China is prepared to “fight to the end.” However, the country remains open to fair negotiations conducted on equal terms. To counter the impact of tariffs, Beijing is advancing economic resilience strategies—boosting domestic demand through consumer trade-in programs, promoting premium goods events, and encouraging foreign trade firms to tap into China’s vast local market.
“We can see that the potential of China’s super-large domestic market is constantly being unleashed,” He said. “China’s foreign trade sector has the confidence and capability to withstand various risk challenges.”