Trade

Chinese Factories Are Outperforming American Factories

JM Ashby
Written by JM Ashby

At least at the moment.

The latest reading of the purchasing managers index (PMI) for the month of September (47.8%) showed that American manufacturing has nosedived into recession and is now at its lowest level since the Great Recession in 2009.

China's manufacturing sector had already been in recession for some time, but Chinese factory activity has recovered and is currently seeing growth while American factory activity craters.

From the Wall Street Journal:

Headline numbers do look rosy—particularly the privately compiled Caixin factory PMI, which showed activity rebounding sharply to 51.4, its highest level since early 2018. China’s official PMI also bounced back, and its export subindex notched its strongest reading since April. Export orders are still falling but the pace of decline has now eased for three consecutive months. That is a particularly striking contrast with the U.S., where export orders dropped last month at a pace last seen during the 2009 financial crisis.

The caveat is that Chinese factory activity is likely going to dip again after the holiday season particularly if Trump imposes tariffs on another $150 billion in Chinese goods on December 15th as he is expected to do.

But that's not going to lead to a recovery in American manufacturing. Chinese factories will simply join American factories in the toilet once again.

Even ending Trump's trade war with China may not lead to a recovery in American manufacturing, at least not by itself. China and the United States could roll back all of their tariffs tomorrow but access to some parts of the Chinese market may never be fully restored. And that's not necessarily a political decision on the part of Chinese companies; it's a business decision in a world where the United States is not a reliable trading partner.

There's also the matter of Trump's tariffs on other parts of the world including likely tariffs on the European Union that could be imposed any day or week now.

  • muselet

    … [T]he United States is not a reliable trading partner.

    What’s shocking is that less than three years of Donald Trump has made a statement like that not shocking.

    I wonder who Trump will blame for the looming global recession.

    –alopecia

    • Draxiar

      His impeachment.