China’s industrial profits plummet as Donald Trump’s tariffs hit

China’s industrial firms saw their profits drop the most since October, illustrating weakness in an economy strained by higher US tariffs and lingering deflationary pressure.Industrial profits fell 9.1% last month from a year earlier, according to data released Friday by the National Bureau of Statistics. The May reading reversed a modest gain earlier this year and took the decline in the first five months to 1.1%.

Bloomberg Economics had forecast a drop of 0.3% year-on-year in May.
The deterioration bodes ill for business confidence and could make companies more reluctant to invest and hire. It also highlights the need for more government stimulus by Beijing to ensure it meets its annual growth target of around 5% — even though some economists turned less bearish on the outlook after a truce in the trade war with the US and a recovery in consumption lately.Profits suffered even as China’s industrial companies benefited from the government’s programme to subsidise upgrades of equipment and consumer goods by businesses and households.

Thanks to the programme, investment in equipment and instruments posted double-digit growth in the first five months, while expansion in retail sales beat expectations, boosting demand for industrial products.

Persisting deflationary risks in the economy remained a drag on profitability.

The May contraction in industrial enterprises’ earnings came despite a 5.8% expansion in industrial output, according to NBS numbers. The overall industrial profits of 2.72 trillion yuan ($379 billion) in January-May were more than a fifth less than during the same period in 2021 and 2022.