China's manufacturing activity fell to shrinking territory from its nearly two-year low in April As the trade war with the United States continues to escalate, it has damaged bilateral trade.

According to data from the National Bureau of Statistics on Wednesday, the official purchasing managers index was below the 50-level threshold at 49.0 in April, the first expansion since January has begun to be from a contraction.

The reading missed analyst expectations for a 49.8 contraction in Reuters vote, marking the fastest growth in China's manufacturing activity in March as exporters ship front-loading to avoid higher liability.

U.S. President Donald Trump imposed a 145% cumulative new tariff on Chinese goods this year, with most tariffs taking effect in April after his Liberation Day announcement. According to fact statements released by the White House, this brought certain products from China to a total tariff of up to 245%.

China's new tax on U.S. goods was 125% before condemning Washington's high tariffs as a "meaningless digital game."

Chetan Ahya, chief Asian economist at Morgan Stanley, said in a note on Monday that trade flows between the two countries had been "hardly damaged".

While there is little evidence of progress in trade negotiations between the two countries, recent reports suggest that some relief was imposed locally as both governments tried to cover up the economic impact of punitive tariffs.

China has reportedly approved tariff exemptions on certain U.S. goods, including imports of drugs, aerospace equipment, semiconductors and ethane.

On Wednesday, Trump signed an executive order exempting foreign cars and parts from additional taxes after tariffs on a range of electronic products, including Earlier this month.

Nomura estimates that about 2.2% of China's GDP will be directly affected by U.S. tariffs, while about 9 million jobs in China's manufacturing sector are directly subject to Trump's tariffs.

At an economic policy-making meeting last week, Chinese authorities pledged to support businesses and workers most affected by large-scale U.S. tariffs, while also saying the urgency of implementing more aggressive fiscal policies and a "moderately relaxed" monetary policy to support the economy.

While a series of major Wall Street banks have cut their GDP forecasts over the year, Beijing reiterated that Beijing is “fully confident” to achieve its lofty goal of “about 5%” this year.

"The impact of offsetting tariffs may require double stimulus," said Dan Wang, director of China's Eurasia Group, a Chinese risk consulting firm.

Wang said Beijing will need to deploy at least 20,000 yuan in fiscal spending to cope with a 2% loss of GDP.

Although the Trump administration insists on ongoing trade talks with Chinese officials, Beijing has repeatedly denied any negotiations to resolve the tariff dispute with Washington.

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