China’s Services Sector Hits 7-Month Low as U.S. Tariffs Weigh on Outlook

Growth in China’s services sector slowed to a seven-month low in April, as fresh U.S. tariffs and weak business sentiment dampened demand, according to the latest Caixin/S&P Global Services Purchasing Managers’ Index (PMI) released Tuesday.

The index slipped to 50.7 from 51.9 in March, marking the weakest expansion since September. A reading above 50 indicates growth, but the latest data signals a sharp loss of momentum. The official services PMI also eased to 50.1.

“A cloud over the market outlook has subdued both business and consumer confidence,” said Wang Zhe, Senior Economist at Caixin Insight Group.

New business growth fell to its lowest level since December 2022. Although export orders saw a modest uptick — supported in part by a rebound in tourism — domestic demand remains fragile.

Amid rising operational costs and softening demand, service providers cut jobs for the second consecutive month, resulting in rising backlogs. Business confidence dropped to its lowest level since February 2020, with firms citing ongoing China-U.S. trade tensions as a key concern.

U.S. President Donald Trump’s tariff campaign has hit Chinese exports hard, especially in manufacturing and intermediate goods. The services sector — which employs 48% of China’s workforce and contributes over 56% to national GDP — is now feeling the ripple effects.

To stay competitive, firms slashed prices despite facing higher input costs, further squeezing profit margins.

The broader Caixin China General Composite PMI, which includes both manufacturing and services activity, dropped to 51.1 from 51.8 in March.

Last month, the ruling Communist Party’s Politburo pledged targeted support for sectors most affected by the tariffs and urged preparation for worst-case economic scenarios.

Analysts at Morgan Stanley warned the second quarter could see GDP growth slow by a full percentage point if trade tensions escalate. They expect Beijing to rely on selective stimulus, urban renewal, and long-term support for consumption.