China Might Not Admit It, but Trump’s Tariffs Really Sting

China

On June 14, China released a flurry of economic data points. China’s economic data has received intense scrutiny this year amid the US-China trade war. US President Donald Trump has said multiple times that US tariffs are hurting China and that companies will leave the country to escape them.

Industrial production

The economic data that was released today showed a continued slowdown in the world’s second-largest economy. China’s industrial production rose 5% in May, far below analysts’ expectation of 5.5%. The metric stood at 5.4% in April. China’s industrial production growth rate in May was at its lowest point in 17 years. Earlier this month, the International Monetary Fund lowered China’s 2019 growth forecast by ten basis points to 6.2%. Morgan Stanley also lowered China’s 2019 growth forecast by ten basis points to 6.4%. Read China’s Growth Outlook Is Gloomy, Trade War Escalates for more analysis.

Apple (AAPL) supplier Foxconn might consider moving Apple’s assembly out of China if President Trump imposes tariffs on remaining Chinese goods. Apple was Berkshire Hathaway’s biggest holding at the end of the first quarter. Apple has gained 24.1% year-to-date, outperforming the SPDR S&P 500 ETF (SPY).

Fixed asset investment

China’s May fixed asset investment data was also lower than expected. The data showed fixed asset investment expanding at 5.6% in the first five months of the year compared to 6.1% in the first four months. The services sector sagged, too, with the index of services production showing growth of 7% in May compared to 7.4% in April. Soft economic growth has taken a toll on Chinese stocks as well. The iShares China-large Cap ETF (FXI) is up only 4.6% this year. Last year also, Chinese equity markets underperformed global markets.