17/05/2025

BIZ & FINANCE SATURDAY | MAY 17, 2025

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Tariff cuts ease mass China layoff fears but job woes linger

The data highlights the challenge policymakers face as steep US tariffs cloud the outlook for the export heavy economy, particularly for the mainstay automobiles sector. Real GDP contracted an annualised 0.7% in January-March, preliminary government data showed, much bigger than a median market forecast for a 0.2% drop. The decline was due to stagnant private consumption and falling exports, suggesting the economy was losing support from overseas demand even before Trump’s announcement on April 2 of sweeping “reciprocal” tariffs. The data did highlight some brighter aspects, which included GDP growth being revised up slightly to 2.4% from 2.2% for the final quarter of last year. Capital expenditure rose a faster than-expected 1.4%, helping domestic demand add 0.7 percentage point to GDP growth. Overall, however, analysts were cautious about the softer demand impulse and risks to the outlook from a Trump-led change to the global trade order. Surge in load factors to Chinese destinations: Singapore Airlines SEOUL: Singapore Airlines has seen a surge in passenger traffic into China in recent months, but outbound travel has still not recovered to pre-pandemic levels, chief commercial officer Lee Lik Hsin said yesterday. “We’ve seen a strong surge in inbound travel to China over the past six months,” Lee said at a briefing after the annual results release. Load factors, or the share of seats sold on flights, on the carrier’s China flights have improved to within the 80% range, compared to the 70% range last year, he said. Asia’s recovery in international air travel following the pandemic has been uneven, with progress in some areas held back by China. As the world’s second-largest economy, China has been slower than other major markets to resume international flights, which has weighed on the overall pace of the region’s aviation rebound. The airline’s full-service operations into China have mostly returned to pre-pandemic levels, reflecting a strong recovery in demand, he said. However, its budget arm, Scoot, is currently operating at approximately 80% of its pre Covid capacity into the Chinese market, indicating that full restoration for the low-cost segment is still underway. Singapore Airlines yesterday reported a record annual net profit, boosted by a one-off gain from a merger of its 49%-owned Indian carrier Vistara and Air India, but lower air fares in response to increased competition weighed on operating profit. – Reuters

o Current trade levies could cost 4–6 million positions; a 20% reduction may shrink losses to 1.5–2.5 million

BEIJING: Chinese Liu Shengzun lost two jobs in just one month as US import tariffs shot up to triple digits in April, forcing a Guangdong lighting products factory, and then a footwear maker, to reduce output. Tariffs came down dramatically this week, but Liu has given up on factory jobs and is now back farming in his hometown in southern China. “It’s been extremely difficult this year to find steady employment,” said the 42-year-old, who used to earn 5,000-6,000 yuan (RM2,967-3,563) a month as a factory worker and now doesn’t have a steady source of income. “I can barely afford food.” The rapid de-escalation in the US China trade war after the Geneva talks last weekend has helped Beijing avoid a nightmare scenario: mass job losses that could have endangered social stability – what the ruling Communist Party sees as its top-most priority, key to retaining its legitimacy and ultimately power. But this year’s US tariff hikes of 145% left lasting economic damage and even after the Geneva talks remain high enough to continue to hurt the job market and slow Chinese growth, say economists and policy advisers. “It was a win for China,” a policy adviser said of the talks, speaking on condition of anonymity due to the topic’s sensitivity. “Factories will be able to restart operations and there will be no mass layoffs, which will help maintain social stability.” But China still faces challenging US tariffs of 30% on top of duties worker “The data may lead to growing calls for bigger fiscal spending,“ he said, adding the economy could contract again in the second quarter depending on when the hit from tariffs intensifies. On a quarter-on-quarter basis, the economy shrank 0.2% compared with market forecasts for a 0.1% contraction. Japan’s Economic Revitalisation Minister Ryosei Akazawa said big pay hikes offered by companies will likely underpin a moderate economic recovery, but warned of risks to the outlook. “We must be mindful of downside risks to the economy from US tariff policy. The hit to consumption and household sentiment from continued price rises is also a risk to growth,“ Akazawa told a news conference after the GDP data. Private consumption, which accounts for more than half of Japan’s economic output, was flat in the first quarter, compared with market forecasts for a 0.1% gain. The GDP deflator, which shows the extent to which firms are able to pass on rising costs, rose 3.3% in January

unknown. A factory activity survey predicted employment declined in April, but analysts believe Beijing was more concerned about a potential acceleration of job losses than the absolute numbers over the course of a month. Exporters had already been paring back their workforce to stay competitive in what risks turning into a deflationary spiral. “It’s hard to give a figure,” a second policy adviser said of job losses. “The economy is already weak and the tariff war is adding frost on top of snow, but it’s just frost.” A major stumbling block to job creation is the uncertainty of Trump’s tariff moves, which is making exporters wary, analysts say. Li Qiang was among a group of up to 20 people losing their jobs at a company that acted as an intermediary, exporting pneumatic cylinders, which are used in industrial machinery and were made by other Chinese firms. His company closed after losing US orders and being outcompeted in Japan, where rivals rushed to replace the American market. He now works as a ride-hailing driver in the southwestern city of Chengdu and has no plans to return to the export sector, even after the easing of US-China tensions. “Trump’s policies toward China could change at any time, which makes jobs in export-related industries unstable,” said Li. “I don’t plan to put any effort into working in the export sector anymore.” – Reuters

already in place. “It’s difficult to do business at 30%,“ the adviser added. “Over time, it will be a burden on China’s economic development.” Before the meeting in Switzerland, Beijing had grown increasingly alarmed about internal signals that Chinese firms were struggling to avoid bankruptcies, including in labour-intensive industries such as furniture and toys, Reuters reported last week. Now there’s some relief. Lu Zhe, chief economist at Soochow Securities, estimates the number of jobs at risk has fallen to less than 1 million from about 1.5-6.9 million before the tariff reduction. Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis, had estimated the triple-digit tariffs could cause 6-9 million job losses. Current tariff levels could trigger 4-6 million layoffs, while if tariffs drop by a further 20% some 1.5-2.5 million jobs could be lost, she said. China’s 2025 economic growth could slow by 0.7 percentage points in the most optimistic scenario, 1.6 points under the current tariffs, or 2.5 points if the conflict returns to April’s intensity, she estimated. “When you increase the tariffs to such a high level, many companies

decide to stop hiring and to start basically sending the workers back home,” Garcia-Herrero said. “At 30%, I doubt they will say, okay, come back. Because it’s still high,” she added. “Maybe the Chinese government is saying, wow, this was amazing. But I think many companies are not sure that this is going to work.” Government advisers say China is trying to mitigate manufacturing job losses with higher state investment in labour-absorbing public projects and by using the central bank to channel financial resources where new jobs could be created. The People’s Bank of China last week unveiled a new tool to provide cheap funds for services and elderly care, among other stimulus measures. “On employment, the most important driver will come from increased government investment given that the enthusiasm for corporate investment has yet to rise,” said Jia Kang, founding president of the China Academy of New Supply Side Economics. Beijing will try to keep the budget deficit ratio at the roughly 4% level agreed in March, but a higher number “cannot be ruled out if a serious situation arises,” he said. The exact impact of last month’s tariff spike on the job market is

Japan economy shrinks more than expected in January-March quarter TOKYO: Japan’s economy shrank for the first time in a year and at a faster pace than expected, data for the March quarter showed yesterday, under scoring the fragile nature of its recovery now under threat from US President Donald Trump’s trade policies. “Japan‘s economy lacks a driver of growth given weakness in exports and consumption. It’s very vulnerable to shocks such as one from Trump tariffs,“ said Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute.

Japan faces a 24% US import tariff from July unless a deal is struck, as Washington ramps up trade levies on cars, steel, and aluminium— straining Japan’s

auto-reliant economy. – PEXELS PIX

March from year-before levels, accelerating for second straight quarters. But external demand shaved 0.8 point off GDP as exports fell 0.6% and imports rose 2.9%, even before the impact of Trump tariffs begins to materialise in full force. Trump imposed 10% tariffs on all countries except Canada, Mexico and China, along with higher tariff rates for many big trading partners, including

Japan, which faces a 24% tariff rate starting in July unless it can negotiate a deal with the US. Washington has also imposed 25% levies on cars, steel and aluminium, dealing a huge blow to Japan’s economy that relies heavily on automobile exports to the US. Japanese automakers are already feeling the pain. Toyota Motor said it expects profit to decline by a fifth in the current

financial year. Mazda held off disclosing earnings estimates for the current year through March 2026 due to uncertainty over US trade policy. “The early-year GDP contraction serves as a reminder of Japan’s economic struggles. Tariff pain and weak domestic momentum will weigh on growth in the quarters ahead,“ said Stefan Angrick, head of Japan and Frontier markets Economics, Moody’s Analytics. – Reuters