Trade Tensions with the U.S. Threaten China's Manufacturing Job Market

During his first term, President Donald Trump often criticized China, claiming that his tariffs had led to the loss of five million jobs in the country. In a 2019 tweet, he asserted that his trade policies had pushed China "against the ropes."

While economists debated the extent of the damage caused by Trump's tariffs, the narrative underscored the critical role of employment in China's export-driven economy.

With just four months remaining in Trump's second term, the U.S. and China are renegotiating tariffs, placing China's labor market — especially factory jobs — under intense scrutiny. Unlike before, China now confronts significant economic headwinds, making its workforce more vulnerable. A sustained real estate downturn, worsened by the COVID-19 pandemic, has resulted in job losses and increased poverty. Meanwhile, a large influx of recent university graduates is entering the workforce amid youth unemployment rates reaching double digits.

“The situation is clearly much more severe now,” said Alicia Garcia-Herrero, chief economist for Asia-Pacific at investment bank Natixis.

She emphasized that as job opportunities in other sectors dwindle, preserving the roughly 100 million manufacturing jobs in China has become increasingly vital.

This month, Chinese and U.S. officials agreed to temporarily reduce the punitive tariffs each had levied on the other, aiming to prevent a full-scale trade war that could jeopardize both economies.

A Natixis research report warned that if U.S. tariffs remain at their current minimum of 30%, exports to the U.S. could halve, potentially costing up to six million manufacturing jobs. Should the trade war fully resume, job losses could escalate to nine million.

China’s economy has struggled to bounce back from the pandemic, growing more slowly than during Trump’s first term when annual growth exceeded 6%. Although Chinese authorities have targeted roughly 5% growth this year, many economists doubt this goal will be met.

In early 2018, China reported its urban unemployment rate had fallen to a 15-year low, accompanied by record job creation. However, subsequent government crackdowns and stricter regulations have hit thriving industries like technology and online education, sectors that had been major job creators.

Youth unemployment has surged during this period. The unemployment rate for workers aged 16 to 24 was 15.8% in April, an improvement from the previous month, but expected to rise again as 12 million new university graduates join the workforce this year.

In 2023, when youth unemployment reached a record 21.3%, the government temporarily stopped releasing official figures. At the time, a prominent economist estimated the true rate was closer to 50%. Beijing resumed publishing data last year using a revised methodology that lowered the reported unemployment rate.

Employment conditions have also grown more precarious for those currently working. Full-time positions are declining as companies increasingly rely on temporary workers for roles such as food delivery and manufacturing. Although these jobs offer greater flexibility, they tend to pay less and provide limited labor protections or benefits.

Meanwhile, the United States faces its own challenges. Its industries heavily depend on rare earth metals and critical minerals largely controlled by China. Disruptions in Chinese goods risk fueling inflation and creating shortages of essential products.

If negotiations devolve into a contest of economic endurance, China holds an advantage in "trade war resilience," said Diana Choyleva, chief economist at Enodo Economics, a London-based China-focused research firm. Beijing can more easily manage public discontent over labor market disruptions than U.S. politicians can tolerate empty store shelves.

Official data showed that in April, before the suspension of the highest tariffs, new export orders from China dropped to their lowest level since 2022. Even within a single month, the steep tariffs had tangible employment effects.

In Guangzhou, China’s textile industry hub, businesses closed as foreign buyers’ orders declined prior to the tariff suspension. Many attributed reduced hiring to the drop in orders.

Shanghai office worker Jane Hu lost her job last month—not because of Trump’s tariffs, but due to China’s retaliatory move to raise tariffs on U.S. imports to 125%.

Her former employer, a construction machinery firm reliant on U.S. equipment imports, could no longer afford the tariffs, which more than doubled import costs.

This exacerbated existing problems caused by the real estate downturn, with sales plunging 40%, making layoffs unavoidable.

At 33, Hu worries she is overqualified for entry-level jobs. Many companies hesitate to hire women like her—married and childless—due to potential maternity leave costs. She shared a common sentiment among women her age: “We are old and expensive. Why would a company choose us?”

Having secured only two job interviews, Hu has started occasionally driving for ride-hailing services to supplement her income.

In late April, Yu Jiadong, senior official at China’s Ministry of Human Resources and Social Security, announced government plans to stabilize employment, particularly for exporters. Beijing intends to assist companies in retaining workers and encourages the unemployed to start their own businesses.

With so much at stake, employment sensitivity has heightened. A southern China factory owner, who requested anonymity, planned layoffs but postponed them when customers rushed orders following the tariff truce. A government official advised that any workforce reductions be handled quietly to avoid public unrest.

Factory owners employing salaried workers must legally compensate them upon dismissal, usually one month’s salary per year worked, making layoffs costly. Some factories opt to close abruptly and owners vanish to avoid these expenses, according to Han Dongfang, founder of China Labor Bulletin, which monitors factory closures and worker protests.

Non-manufacturing employment has shrunk for over two years, according to monthly industrial firm surveys. The trade war has made companies more cautious, adding to challenges faced by university graduates seeking jobs.

“The job market today is much tougher than before,” said 23-year-old accounting student Laura Wang from Chongqing. She noted that over 80% of her classmates struggled to find work.

Wang highlighted that finance and accounting students face especially steep competition. Limited job and internship openings now require higher qualifications, and tariff-related uncertainties discourage companies from hiring inexperienced candidates.

“There is a lot of uncertainty,” Wang said. “The impact is even greater for recent graduates like me without experience.”