Factory Activity Shrinks in China after U.S. Tariff Escalation

China factory activity contracted, as a Reuters poll was shown on Tuesday, and a sudden halt to two months of recovery was brought by Donald trumps’ "liberation day" package of tariffs.The official purchasing managers index (PMI) is forecasted by a Reuter’s poll of 30 economists to come in at 49.8 on Wednesday down from February's 50.5 and below the 50-point threshold that separates growth from contraction in activity.

The decision by United States of president Donald Trump to impose 145% tariffs on China comes at a particularly challenging moment for the world's second-largest economy, which is experiencing deflation as a result of slow income growth and a protracted real estate crisis. Outbound shipments had been front-loaded by producers in anticipation of the duties, driving exports to a five-month high in March , but the arrival of the tariffs has now called time on that strategy.

It is expected by analysts that more monetary and fiscal stimulus will be delivered by Beijing over the coming months to underpin growth and insulate the economy from the tariffs. It has been repeatedly denied by china that it is seeking to negotiate a way out of the trade policies and tariffs with the U.S. In order to lessen the impact of losing its largest client, at least temporarily, Beijing has therefore moved forward with this year's stimulus plans to tie the economy over.