Two surveys of Chinese manufacturing show demand is weak amid a mounting tariff war with Washington over trade and technology. A monthly purchasing managers’ index released by a business magazine, Caixin, rose to 50.4 from July’s 49.9 on a 100-point scale on which numbers above 50 show activity increasing. That indicates “renewed improvement” but said a gauge of new orders fell to its lowest level this year, the magazine said. A separate survey released Saturday by an industry group, the China Federation of Logistics & Purchasing, showed activity declining to 49.5 from July’s 49.7. It said market demand was “relatively weak.”

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China struggles amid US tariff hikes

Chinese exporters are struggling in the face of U.S. tariff hikes. Exports to the United States, their biggest market, fell 6.5% in July. Washington and Beijing stepped up their fight on Sunday by imposing additional tariffs on billions of dollars of each other’s goods. Beijing has propped up economic growth by boosting government spending on construction. Economic growth sank to 6.2% over a year earlier in the quarter ending in June, its lowest level in at least 26 years.

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US & China imposes tariffs on each other's goods

The United States and China on Sunday put in place their latest tariff increases on each other’s goods, potentially raising prices Americans pay for some clothes, shoes, sporting goods, and other consumer items before the holiday shopping season. President Donald Trump said U.S.-China trade talks were still on for September. “We’ll see what happens,” he told reporters as he returned to the White House from the Camp David presidential retreat. “But we can’t allow China to rip us off anymore as a country.” The 15% U.S. taxes apply to about $112 billion of Chinese imports. All told, more than two-thirds of the consumer goods the United States imports from China now face higher taxes. The administration had largely avoided hitting consumer items in its earlier rounds of tariff increases.

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But with the prices of many retail goods now likely to rise, the Trump administration’s move threatens the U.S. economy’s main driver: consumer spending. As businesses pull back on investment spending and exports slow in the face of weak global growth, American shoppers have been a key bright spot for the economy. As a result of Trump’s higher tariffs, many U.S. companies have warned that they will be forced to pass on to their customers the higher prices they will pay on Chinese imports. Some businesses, though, may decide in the end to absorb the higher costs rather than raise prices for their customers. In China, authorities began charging higher duties on American imports at midday Sunday, according to employees who answered the phone at customs offices in Beijing and the southern port of Guangzhou. They declined to give their names.

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Philip Levy, the chief economist at the San Francisco freight company Flexport who was an adviser in President George W. Bush administration, said it’s hard to say for sure when the latest tariffs may hit U.S. customers in the form of higher prices. But, he added, “If you had to pick a time to do it, this is the worst possible time” because it’s when the bulk of holiday goods are brought into the country.