April manufacturing data from the U.S. affects expectations for a rate cut, U.S. bond market falls.

Taiwan • Business • 05/01 18:32
April manufacturing data from the U.S. affects expectations for a rate cut, U.S. bond market falls.

In April, U.S. manufacturing activity shrank less than anticipated, as the ISM manufacturing index dropped to 48.7, surpassing the forecast of 47.9, prompting a revision in market expectations for a Federal Reserve rate cut this year. U.S. Treasury yields bounced back from their lows, with the 10-year Treasury yield rising to 4.208%. Federal funds futures suggest the likelihood of a June rate cut has dropped to 58%. This shift highlights the market's sensitivity to economic data and how policy expectations affect the bond market.

Key Updates

05/02 09:03

U.S. Tariff Policies Impact SHEIN and Temu Severely: Rising Prices, Supply Chain Restructuring, and Drop in App Rankings

Starting May 2, 2025, the United States will remove the tax exemption for small parcels valued under $800 from China and impose an import tax of up to 120% or a fixed tax of $100 per package, having a significant impact on Chinese cross-border e-commerce platforms SHEIN and Temu. The prices of goods on both platforms have risen by 40% to 100%, leading Temu to shift to a local warehouse model and nearly eliminate direct shipments from China. A reduction in advertising has caused a drop in app store rankings. This policy change is forcing consumers to switch to local platforms, altering their shopping habits.

05/02 05:02

Yiwu businesses are turning to South American and Middle Eastern markets: The US-China trade war has severely damaged the US toy supply chain

Amid the US-China trade war and tariff pressures, exporters in Yiwu in Zhejiang, China, have shifted their focus away from the US towards South American and Middle Eastern markets, which has impacted the US toy supply chain. Exports from Yiwu to the US have significantly decreased, and merchants such as Hu Tianqiang and Lin Xiupeng have adjusted their strategies. The US toy industry faces supply disruptions and rising costs as companies like Hasbro and Spin Master seek to diversify their supply chains, though challenges persist.

05/02 05:02

From China, the US has ended the tariff exemption for low-value parcels, though challenges in implementation remain.

On May 2, 2025, the United States terminated the tariff exemption for low-value import packages from China and Hong Kong, ending the "de minimis" system. This policy change occurred due to accusations by the Trump administration against China's trade practices and drug smuggling, affecting e-commerce platforms such as Shein and Temu. Even though the policy has taken effect, the U.S. Customs and Border Protection is facing challenges in implementation, including complex customs procedures and inadequate logistics handling capacity, revealing systemic bottlenecks.

05/02 04:31

Trump Closes Tax Loophole for Chinese Goods: Online Shopping Costs Increase for American Consumers

Former President of the United States, Donald Trump, ended the de minimis tax exemption rule applicable to China and Hong Kong at the end of April 2025. The rule allowed low-cost goods to enter the U.S. market tax-free. This move was intended to protect American manufacturing and small businesses. However, it results in higher online shopping costs and delivery delays for consumers. Chinese e-commerce platforms like Shein and Temu are affected, resulting in higher product prices. The policy has drawn international attention, as the UK and the EU consider similar measures.

05/02 03:05

In 2025, the US-China trade war heated up: China called for the removal of unilateral tariffs in order to facilitate dialogue.

On May 2, 2025, China's Ministry of Commerce announced it is evaluating the United States' willingness to enter into dialogue, reiterating that the U.S. must remove unilateral punitive tariffs as a precondition for negotiations. The U.S. has imposed tariffs of 145% on Chinese goods, and China has retaliated with tariffs of 125%, resulting in a decline in U.S. exports to China, impacting 860,000 jobs, with the agricultural sector hit hardest. Trade tensions between the two countries are escalating, with growing calls for dialogue and tariff cuts.

05/01 18:32

April manufacturing data from the U.S. affects expectations for a rate cut, U.S. bond market falls.

In April, U.S. manufacturing activity shrank less than anticipated, as the ISM manufacturing index dropped to 48.7, surpassing the forecast of 47.9, prompting a revision in market expectations for a Federal Reserve rate cut this year. U.S. Treasury yields bounced back from their lows, with the 10-year Treasury yield rising to 4.208%. Federal funds futures suggest the likelihood of a June rate cut has dropped to 58%. This shift highlights the market's sensitivity to economic data and how policy expectations affect the bond market.

05/01 18:01

Microsoft is raising Xbox prices to $380 for the Series S and $600 for the Series X due to the trade war and increased development costs.

On May 1, 2025, Microsoft announced a price increase for the Xbox Series S and Series X consoles, accessories, and some games, effective immediately. The Series S has risen to $380, and the Series X has risen to $600. Prices for accessories like wireless controllers and headsets have also increased. Microsoft stated that the price adjustment is due to market conditions and rising development costs, affected by trade wars and supply chain pressures. This move makes Microsoft the latest company, after Sony and Nintendo, to adjust gaming hardware prices.

05/01 17:01

In April 2025, the US manufacturing PMI index fell to 48.7, indicating a continued contraction.

In April 2025, U.S. manufacturing activity further contracted, with the ISM Manufacturing PMI dropping from 49.0 in March to 48.7, staying below the 50-point mark for the second month in a row, signaling a contraction. Even though there was a slight improvement in new orders and employment, the decline in output, rising price pressures, and fewer export orders highlight multiple challenges. Uncertainty around tariff policies and supply chain bottlenecks are adding to the pressures on businesses.

05/01 17:01

Decline in U.S. Retail Performance in Q1 2025: Pressure from Tariff Policies Affects Consumer Confidence

In the first quarter of 2025, the annual U.S. GDP rate declined by 0.3%, marking its first contraction in three years, mainly due to a surge in imports and the effects of tariff policies. Financial reports from brands such as McDonald's, Harley-Davidson, and Estée Lauder indicate declining sales and weakened consumer confidence. The U.S. imposed tariffs as high as 145% on Chinese goods, resulting in a surge in imports and a record trade deficit. The consumer confidence index dropped to its lowest point since the pandemic, highlighting the adverse effects of tariff policies on the economy.

05/01 13:01

One Month into the US-China Trade War: Chinese Stationery Exporters Resume Shipping to the US, with Tariff Costs Passed on to American Customers

As trade tensions between the US and China heat up, with both sides imposing high tariffs on each other, some Chinese stationery and other exporters have resumed shipments to the US because American importers are facing urgent inventory shortages and struggling to find alternative suppliers. Even though the US has imposed tariffs as high as 145% on Chinese goods, the cost is passed on to American customers and is reflected in retail prices, indicating the market's dependence on Chinese-made products.

Manufacturing Data Sluggish but Better Than Expected

According to data released by the Institute for Supply Management (ISM) on May 1, the manufacturing Purchasing Managers' Index (PMI) for April was 48.7, down from 49 in March, marking the lowest since November 2022, but still above the market expectation of 47.9. The index has been in the contraction zone below 50 for the third consecutive month, indicating continued contraction in manufacturing activity.

Detailed data shows that the production index plummeted to 44.0, the largest drop since the height of the pandemic in 2020; the new orders index was 47.2, slightly up from 45.2 the previous month but still in the contraction zone; the employment index was 46.5, also below the threshold. Both the export orders and backlog of orders indices declined, reflecting weak external demand and decreased capacity utilization.

Although the overall data indicates weak manufacturing momentum, the results being slightly better than market expectations led to the interpretation of "better than expected," influencing expectations for the Federal Reserve's policy direction.

Tariffs and Cost Pressures Continue to Affect Business Confidence

The report noted that manufacturers are generally facing rising import costs and tariff pressures. An electronics component company stated, "The price of imports from China has risen sharply, and we cannot pass this on to customers, so many quotes are simply voided." A chemical company also admitted, "First-tier suppliers are directly imposing tariffs on us, and second-tier suppliers are passing on additional costs, leaving us with almost no escape."

The ISM price index rose to 69.8, the highest since June 2022, indicating that raw material and logistics cost pressures are still heating up. Despite weak demand, companies are still facing inflationary pressures, further squeezing profit margins.

The S&P Global manufacturing PMI was also revised down from a preliminary 50.7 to 50.2, flat with March and below the expected 50.5. The report noted that business confidence fell to a 10-month low, reflecting concerns about the future operating environment.

Bond Market Reaction: Yields Rebound from Lows

Following the release of the manufacturing data, the U.S. Treasury market showed a noticeable reaction. According to Bloomberg, although the ISM index indicated manufacturing contraction, the data being better than expected led investors to slightly scale back bets on a Federal Reserve rate cut this year, causing bond prices to fall and yields to rise.

The 10-year U.S. Treasury yield rose 3.3 basis points to 4.208%, having previously touched 4.124%, the lowest since April 7. The 2-year Treasury yield rose 1 basis point to 3.631%, having earlier fallen to 3.558%, also a three-week low. The yield curve spread between the 2-year and 10-year widened to 57 basis points, indicating a slight adjustment in short-term rate expectations.

According to the CME FedWatch tool, the probability of a rate cut in June fell from 68% earlier to 58%, and the probability of a rate cut at the May 6-7 meeting is only 5%. This reflects a cooling of market expectations for a near-term policy shift by the Federal Reserve.

Labor Market and Other Economic Data Intertwine to Influence Expectations

Meanwhile, the Labor Department reported an unexpected increase in initial jobless claims by 18,000 to 241,000, the highest since February, with continuing claims rising to 1.92 million, the highest since 2021. This data suggests the labor market may be starting to cool, echoing the weakness in the manufacturing employment index.

Additionally, the preliminary GDP data for the first quarter showed the U.S. economy contracted by 0.3%, the first negative growth in three years. Analysts pointed out that companies imported in advance to avoid a new round of tariffs, leading to a widening trade deficit and dragging down overall economic performance.

Nevertheless, the market is still waiting for more "hard data" to confirm whether the economy is truly weakening. FHN Financial macro strategist Will Compernolle noted, "Excluding soft signals like sentiment surveys and corporate earnings calls, there is currently no hard data clearly indicating that the Federal Reserve must cut rates immediately."

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