BEIJING (Reuters) - Chinese worker Liu Shengzun lost two jobs in just one month as U.S. import tariffs hit triple-digit import rates in April, forcing Guangdong lighting products factory and then a footwear manufacturer to reduce production.
Tariffs fell sharply this week, but Liu has given up his factory job and is now farming in his hometown in southern China.
"It's hard to find stable jobs this year," the 42-year-old said, earning $5,000-6,000 ($693-832) a month as a factory worker and there is no stable source of income now. “I can hardly afford food.”
After talks in Geneva last weekend, the rapid downgrade of the U.S.-China trade war has allowed Beijing to avoid a nightmare scenario: mass unemployment that could endanger social stability - the ruling Communist Party regards it as its most important priority and is the key to retaining its legitimacy and ultimate power.
But U.S. tariffs hikes this year have seen 145% ongoing economic losses, even after the Geneva talks remain high enough to continue to hurt the job market and slow China's growth, economists and policy advisers said.
"This is a victory for China," a policy adviser said of the negotiations. "The factory will be able to restart operations and there will be no large-scale layoffs, which will help maintain social stability."
However, China still faces challenging the U.S. tariffs of 30%, which has reached 30%.
"It's hard to do business at a rate of 30%," the consultant added. "As time goes by, it will be a burden on China's economic development."
Reuters reported last week that Beijing was increasingly shocked by internal signals that Chinese companies were working to avoid bankruptcy, including in labor-intensive industries such as furniture and toys.
Now I felt a little relieved.
Lu Zhe, chief economist at Soochow Securities, estimates that before the tariffs are lowered, the number of jobs at risk has gone from about 15,000 to 6,900,000.
Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis, estimates that triple-digit tariffs could cause 60,000 to 9 million jobs. She said the current tariff levels could trigger 40,000 to 6 million layoffs, and if the tariffs drop by 20%, it could lose 15,000 to 2,500,000 jobs.
She estimates that under the most optimistic situation, China's economic growth in 2025 could slow by 0.7 percentage points, with 1.6 points under current tariffs, which could slow if the conflict returns to its intensity in April.
"When you raise tariffs to such a high level, many companies decided to stop hiring and basically send workers home," Garcia-Herrero said.
"I doubt they would say, 30% would say, OK, because it's still high," she added. "Maybe the Chinese government is saying, wow, that's amazing. But I think a lot of companies aren't sure that this will work."
“Unstable”
Government advisers said China is trying to mitigate manufacturing losses through higher state investments to absorb labor-oriented public projects and use central banks to convey financial resources that can create new jobs.
The People's Bank of China last week launched a new tool to provide cheap services and elderly care, among other stimulus measures.
"When you are employed, the most important driving force will come from the increase in government investment, as enthusiasm for corporate investment has not yet increased," said Jia Kang, founding president of China's new supplier School of Economics.
He said Beijing will try to keep the budget deficit ratio at about 4% in March agreeing, but “higher numbers cannot be ruled out if serious situations occur.”
The exact impact of last month’s tariff peak on the job market is unclear. A factory activity survey predicted jobs fell in April, but analysts believe Beijing is more concerned about potential job losses than the absolute figures in a month.
Exporters are already retreating to maintain competitiveness to become risky to become a deflationary spiral.
"It's hard to give numbers," the second policy adviser said of unemployment. "The economy is already weak, and the tariff war adds frost on the snow, but it's just frost."
Analysts say the main stumbling block to job creation is the unpredictability of US President Donald Trump's tariff policies, which keeps exporters cautious.
Li Qiang is a group of up to 20 people who are unemployed in a company acting as an intermediary, exporting cylinders that are used in industrial machinery and are manufactured by other Chinese companies.
His company closed after losing U.S. orders and rushing to replace the U.S. market in Japan.
Now he works as a ride-hailing driver in the southwest city of Chengdu, and has no plans to return to the export industry even after eased tensions in the United States-China.
"Trump's policy toward China may change at any time, which makes the work of export-related industries unstable," Lee said. "I don't plan to work in the export sector any more."
($1 = 7.2109 Chinese RMB)
(Reports from Liangping Gao, Kevin Yao and The Beijing Newsroom; Other reports from Ellen Zhang in Beijing; writing by Marius Zaharia; editors of Lincoln Feast.)