China’s service growth will be 7 months lower as tariffs chew
Good morning and welcome to our comprehensive coverage of our business, financial markets and the global economy.
Investors will scrutinise the latest health checks of businesses around the world today, for signs that the US-China trade war is hurting the global economy.
And… the latest purchasing manager survey data shows that growth in China’s services sector’s activities have hit a seven-month low as business trust has fallen to a lowest level since the early days of the Covid-19 pandemic.
Released this morning, the Caixin China General Services Business Activity Index fell from 51.9 in March to 50.7 in April. This marks the slowest rise in activity since last September, but exceeds the 50-point mark, signaling stagnation.
Chinese services sector companies have reported a slowdown in new businesses, but business sentiment has fallen to a lowest level since February 2020, while companies continue to cut staffing levels.
The report says:
The slower growth of business activities reflects trends seen in new businesses. Anecdotal evidence shows that amid fresh tariffs, the commodity trade disruption had a negative impact on some service providers in April, resulting in the slowest rise in overall new work for 28 months.
New export operations have increased slightly, with some companies noting that foreign demand has improved amid increasing tourism activities.
Yesterday’s data showed that growth in the U.S. services sector rose in April, prices paid by American companies for materials and services jumped, and tariffs announced by the Trump administration are driving inflation.
Financial markets are calling for progress in trade consultations between the United States and its trading partners. Yesterday, Treasury Secretary Scott Bescent told CNBC that he believes the United States is “very close to some deals.”
Bessent explained:
“As President Trump said last night in Air Force 1, perhaps earlier this week.”
He added that there could be “significant progress in the coming weeks” with China. Last week, Beijing showed it was “evaluating” potential trade talks with the US…
Agenda
9am BST: UK car sales data for April
9am BST: Eurozone Services Sector PMI Report for April
9:30am BST: UK Services Sector PMI Report for April
3.10pm BST: US RCM/TIPP Economic Optimism Index
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Barbie dolls cost more in the customs world
Barbie dolls at Target Store in San Leandro, California. Photo: John G Mabanglo/EPA
American children face paying higher prices for Barbie dolls for Trump’s tariffs on imports.
Toy manufacturing giant Mattel revealed last night that he plans to raise prices for American toys due to tariffs and aims to move several manufacturing businesses from China.
In its latest revenue report, Mattel told shareholders it was taking “mitigation actions” to completely offset the impact of the potential incremental costs of tariffs on future performance.
These measures are:
Accelerate the diversification of its supply chains and further reduce its dependence on products offered in China;
Optimizing product sourcing and product mix
We take pricing actions in our US businesses when necessary.
Paying more for the new Barbie, or Ken, may underscore the impact of tariffs on US consumers.
However, Donald Trump last weekend claimed that “young women” didn’t need 37 dolls and was “very happy with 2, 3, 4, 5.”
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Phillips lowers profit margin guidance than trade tensions
Dutch medical technology company Philips has denounced the US trade war by lowering its profitability outlook this fiscal year.
In the latest financial results, Phillips calculated the “estimated impact of the currently announced tariffs,” so he trimmed the profitability outlook for that year.
Phillips currently forecasts the impact of estimated net tariffs from 250 million euros to 300 million euros “after substantial tariff easing,” reducing its adjusted operating revenue margin forecast from 1% point, 10.8% to 11.3%.
Royal Phillips CEO Roy Jacobs explained:
In an uncertain macro environment that has been strengthened due to the potential impact of tariffs, we focus on what we can control.
We take critical cost measures to improve supply chain agility and mitigate the economic impacts as much as possible, ensuring we continue to serve our customers and consumers.
Phillips manufactures medical devices such as MRI and CT scanners, and uses artificial intelligence (AI) to speed up results.
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Updated to 02.15 EDT
Ford expects to cut $1.5 billion in profits from Trump’s tariffs
Ben’s 2025 Ford Expedition Built at a Kentucky truck factory: Carolyn Custer/AP
The American auto industry calculates the costs of a trade war.
Overnight, Ford Motor suspended its annual guidance due to “customer-related uncertainty,” estimated that the new tariffs would cost around $1.5 billion (£1.1 billion) of profits this year.
Ford CEO Jim Farley told analysts:
“It’s still too early to fully understand the reactions of our competitors to these tariffs.”
“But it’s clear that in this new environment, automakers with the largest footprint in the US have a huge advantage.”
Last week, a 25% import tax on Donald Trump’s engines, transmissions and other major car parts came into effect. This is a move that drives up costs for automakers.
Ford previously predicted that it would generate between $7 billion and $8.5 billion in revenue before interest and taxes.
However, due to uncertainty about how the trade war will unfold, Ford told investors that guidance is currently being suspended, explaining:
This will result in material recent risks, including potential disruption of the supply chain across the industry affecting production, increased US tariffs, changes in tariffs, tariff offsets, retaliation tariffs by other governments, other restrictions, and changes in tariff implementation, including potentially related market impacts, and ultimately, policy uncertainties related to tax and emissions policies.
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Updated to 01.59 EDT
China’s service growth will be 7 months lower as tariffs chew
Good morning and welcome to our comprehensive coverage of our business, financial markets and the global economy.
Investors will scrutinise the latest health checks of businesses around the world today, for signs that the US-China trade war is hurting the global economy.
And… the latest purchasing manager survey data shows that growth in China’s services sector’s activities have hit a seven-month low as business trust has fallen to a lowest level since the early days of the Covid-19 pandemic.
Released this morning, the Caixin China General Services Business Activity Index fell from 51.9 in March to 50.7 in April. This marks the slowest rise in activity since last September, but exceeds the 50-point mark, signaling stagnation.
Chinese services sector companies have reported a slowdown in new businesses, but business sentiment has fallen to a lowest level since February 2020, while companies continue to cut staffing levels.
The report says:
The slower growth of business activities reflects trends seen in new businesses. Anecdotal evidence shows that amid fresh tariffs, the commodity trade disruption had a negative impact on some service providers in April, resulting in the slowest rise in overall new work for 28 months.
New export operations have increased slightly, with some companies noting that foreign demand has improved amid increasing tourism activities.
Yesterday’s data showed that growth in the U.S. services sector rose in April, prices paid by American companies for materials and services jumped, and tariffs announced by the Trump administration are driving inflation.
Financial markets are calling for progress in trade consultations between the United States and its trading partners. Yesterday, Treasury Secretary Scott Bescent told CNBC that he believes the United States is “very close to some deals.”
Bessent explained:
“As President Trump said last night in Air Force 1, perhaps earlier this week.”
He added that there could be “significant progress in the coming weeks” with China. Last week, Beijing showed it was “evaluating” potential trade talks with the US…
Agenda
9am BST: UK car sales data for April
9am BST: Eurozone Services Sector PMI Report for April
9:30am BST: UK Services Sector PMI Report for April
3.10pm BST: US RCM/TIPP Economic Optimism Index
Share
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