(Bloomberg) -- As China staggers into a slowdown caused by Donald Trump’s trade war, a hobbled jobs market is impairing the resilience Beijing needs to battle it out against the US.
Trump’s 145% tariffs on China’s goods are threatening to obliterate its access to the world’s biggest economy, with Goldman Sachs Group Inc. estimating that up to 20 million people — or about 3% of the labor force — may be exposed to US-bound exports. A full economic divorce would roil a workforce already drained by widespread salary cuts and layoffs.
On top of an uncertain business outlook, productivity gains from China’s adoption of artificial intelligence and automation likely contributed to slowing demand for employment despite an uninterrupted economic recovery during the first months of the Trump presidency.
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Helped by government support deployed in late 2024, growth barely slowed in the first quarter to stay above 5% from a year earlier, according to most economists, outpacing the target set by Beijing.
By contrast, a measure of job openings compiled by Paris-based QuantCube Technology plunged nearly 30% from a year ago over the past two months, based on a data set that tracked online postings from over 2,000 companies.
An index of future hiring plans fell in March to a six-month low, according to results of a poll of mostly private companies surveyed by the Cheung Kong Graduate School of Business, or CKGSB. The employment sub-gauge of China’s non-manufacturing purchasing managers’ index is also in decline.
“The fourth quarter stimulus hasn’t translated into the labor market yet,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics. “Companies want a more certain economic outlook before ramping up hiring.”
Exports have an outsized impact on employment, supporting about 120 million jobs in manufacturing and related services industries, according to an estimate by China Galaxy Securities in 2023. That’s almost a fifth of the overall workforce.
The labor market’s exposure to trade with the US is also significant. Goldman Sachs sees between 10 and 20 million workers linked to exports there. Citigroup Inc. estimates shipments to America could be connected to about 9 million urban jobs.
Chronic weakness in the jobs market is a major obstacle for a campaign to revive consumption, a priority for China’s leadership as it tried to engineer a turnaround in the face of a prolonged property crisis.
Employment has been under pressure from challenges both at home and abroad, according to Wang Xiaoping, minister of human resources and social security. She spoke last month on the sidelines of the annual session of China’s legislature, which set the goal of adding more than 12 million urban jobs in 2025.
China’s struggle to make headway with jobs loomed large even as the economy powered ahead in early 2025 after ending last year by growing at the fastest clip in six quarters.
Adding to a late policy blitz, a recovery in private corporate sentiment provided a boost, especially after homegrown start-up DeepSeek’s AI breakthrough and President Xi Jinping’s high-profile meeting with entrepreneurs including Jack Ma.
Businesses reported rising confidence in sales and financing in the first three months, according to indexes built by CKGSB on the basis of its poll, which found the highest optimism in almost two years.
The economy’s strong run in the first few months likely convinced China’s central bank to delay monetary easing so far this year. Officials have yet to cut interest rates or lower the amount of cash banks must set in reserves, despite heightened expectations over the past few months.
Further evidence of green shoots appeared in demand for heavy equipment, a reflection of front-loaded government efforts to fund infrastructure projects by means of record bond sales.
China’s excavator sales surged 29% in March from a year ago, the fastest expansion for that month since 2021. The government’s net debt issuance surged to 1.5 trillion yuan ($206 billion) in February, nearly triple the amount it raised in the same month in 2024.
Indicators compiled by QuantCube show that exports’ contribution to economic growth remained stable as of the beginning of April. Consumption picked up thanks to a recovery in housing-related spending in recent weeks.
QuantCube, an alternative data provider, bases its estimates of economic growth on high-frequency statistics such as transportation figures, online shopping orders and satellite data.
“The first quarter of 2025 has continued the upward momentum seen in the fourth quarter across all sectors,” said Thanh-Long Huynh, chief executive officer and co-founder of QuantCube.
Jumpstarting consumption will grow more daunting in the absence of a more upbeat outlook for employment. To offset the shock of sweeping US tariffs, Beijing needs to ramp up domestic demand and help offset the loss of a market that absorbed $525 billion of Chinese goods last year.
Bloomberg Economics estimates that a wipe-out of China’s shipments to the US would leave as much as 3% of its gross domestic product at risk. Goldman Sachs, which is among global banks that cut their forecast for China’s GDP growth, now forecasts a gain of 4% in 2025, down from 4.5% previously.
The US announced late Friday that it exempted smartphones, computers and other electronics from its so-called reciprocal tariffs. That could provide some relief for Chinese exporters, since the exclusion covers more than $101 billion in goods from the country.
Still, expectations are rising that Chinese policymakers will roll out greater stimulus to help the economy achieve the official target of around 5% growth this year. While officials have already signaled they’re pivoting to boosting consumption this year, measures enacted so far remain limited.
As a result, confidence among households has yet to turn a corner. An index constructed by Morning Consult Intelligence shows consumer sentiment weakened in early 2025 from last year, based on the firm’s daily survey.
“The combination of extremely high US tariffs, sharply declining exports to the US, and a slowing global economy is expected to generate substantial pressures on the Chinese economy and labor market,” Goldman economists led by Andrew Tilton said in a report.
--With assistance from James Mayger.
(Updates with additional details in eigth and ninth paragraphs.)
