China Faces Significant Job Loss Risks Amid Renewed U.S. Trade Tariffs

During his first term, President Trump frequently claimed that his tariff policies had led to the loss of five million jobs in China, asserting in 2019 that his trade measures had put China on the defensive.

Though economists debated the actual economic impact of these tariffs, the emphasis on employment underscored how critical jobs are to China’s export-driven economy.

As the United States and China engage in fresh tariff negotiations early in President Trump’s second term, the state of China’s labor market—particularly manufacturing jobs—is a key concern. Unlike before, China’s economy is now under strain from a persistent property market downturn worsened by the Covid-19 pandemic, which has led to job losses and reduced household wealth. Meanwhile, a surge of new university graduates is entering the workforce amid double-digit youth unemployment.

Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis, said the current labor market challenges are considerably more severe than in the past.

With fewer opportunities in other industries, she emphasized the growing importance of protecting China’s roughly 100 million manufacturing jobs.

Recently, officials from both countries agreed to temporarily scale back the harsh tariffs they had imposed, aiming to prevent a full-blown trade war that could damage both economies.

Natixis research indicates that if U.S. tariffs remain at current levels—around 30 percent or higher—China’s exports to the U.S. could be halved, potentially costing up to six million manufacturing jobs. A full resumption of the trade war might increase job losses to nine million.

China’s economic recovery from the pandemic has been sluggish, with growth rates below those seen during the first Trump term when annual expansion exceeded 6 percent. Although the Chinese government targets about 5 percent growth this year, many experts predict actual growth will fall short.

In early 2018, China reported its urban unemployment rate at a 15-year low with record new job creation. However, subsequent government crackdowns and stricter regulations in sectors such as technology and online education—previously major job creators—have dampened employment prospects.

Youth unemployment has climbed sharply, with the rate for those aged 16 to 24 reaching 15.8 percent in April, an improvement over the prior month but expected to rise again as 12 million new college graduates enter the labor market this year.

In 2023, when youth unemployment reportedly hit a record 21.3 percent, the government temporarily stopped publishing these figures amid speculation that the real rate could be closer to 50 percent. The data resumed last year with revised methodology, resulting in a lower reported rate.

Employment conditions have also become more precarious for those with jobs, as companies increasingly rely on gig workers for roles like food delivery and manufacturing tasks. While offering flexibility, these positions typically pay less and lack benefits and job security.

Conversely, the U.S. economy faces its own challenges, including heavy dependence on rare earth metals and critical minerals largely controlled by China. Interruptions in Chinese imports risk increasing inflation and causing supply disruptions.

Diana Choyleva, chief economist at Enodo Economics, noted that if the trade standoff hinges on economic resilience, China may have an advantage. Beijing is better positioned to manage public dissatisfaction over labor market shocks than U.S. politicians are to handle consumer frustration from empty shelves.

Official data showed that in April, prior to the temporary tariff truce, China’s new export orders dropped to their lowest point since 2022. Even within a single month, the high tariffs significantly impacted employment.

In Guangzhou, a hub for garment manufacturing, many businesses shut down as foreign orders declined before the tariffs were eased. The drop in demand forced employers to reduce hiring.

Jane Hu, an office worker in Shanghai, recently lost her job—not directly due to U.S. tariffs, but because of China’s retaliatory move to raise duties on American imports to 125 percent.

Her former employer, a construction equipment firm reliant on importing U.S. machinery, faced sharply increased costs and could no longer sustain operations amid the property market slump, which caused sales to fall by roughly 40 percent and necessitated layoffs.

At 33, Ms. Hu worries that her experience makes her less attractive for entry-level roles. She noted companies hesitate to hire married women without children due to potential parental leave costs. As she put it, many women her age say, "We are old and expensive. Why would any company choose us?"

Having secured only two job interviews, Ms. Hu has turned to occasional ride-hailing work to supplement her income.

In late April, Yu Jiadong, a senior official from China’s Ministry of Human Resources and Social Security, announced government plans to stabilize employment, particularly for exporters. Measures include helping companies retain workers and encouraging entrepreneurship among the unemployed.

Given the stakes, employment sensitivities remain high. A factory owner in southern China, speaking anonymously, revealed he delayed layoffs after a surge in orders following the tariff pause. Officials reportedly advised that any workforce reductions be handled discreetly to avoid public unrest.

Han Dongfang, founder of China Labor Bulletin, explained that by law, companies must compensate laid-off salaried workers—typically one month’s pay for each year of service—making layoffs costly. Some factory owners avoid this expense by shutting operations without notice and disappearing.

Employment outside manufacturing has contracted for over two years according to monthly industrial surveys. The ongoing trade tensions add further uncertainty, complicating job prospects for recent graduates.

Laura Wang, a 23-year-old accounting graduate student in Chongqing, described the current job market as much more challenging than before. She said over 80 percent of her peers are struggling to find employment.

Ms. Wang highlighted that finance and accounting fields are especially competitive, with fewer internships and jobs available and significantly higher entry requirements. The disruptions caused by tariffs have made employers reluctant to hire candidates without proven experience.

"There is a lot of uncertainty," she said. "For fresh graduates like me with no work history, the impact is even more severe."