Analysis of the Impact of Sino-U.S. Trade Friction on the Manufacturing Cycle and Inflation

Recently, the trade relations between China and the United States have become tense again, raising concerns in the market about the outlook for the manufacturing sector. This article will analyze the short-term and long-term impacts that trade friction may have on the manufacturing cycle and inflation.

I. Macroeconomic Environment Analysis

The current Sino-U.S. trade relationship is at an impasse, with both sides unwilling to make the first concession, leading to continued tariff increases and gradually worsening economic losses. The direction of this game will affect the global economic landscape, with the positions of about 80 countries playing a key role in the Sino-U.S. contest, especially regarding trade policy escalation and supply chain restructuring. In the future, Sino-U.S. relations may shift from the current confrontation to a more intense game, with the support of other global economies determining whether both sides can end trade friction through compromise or tough measures. The outcome of this game will profoundly impact the stability and development of the global economy.

2. The Impact of Tariffs on the Manufacturing Industry

short-term impact ( Q2-Q3 2025 )

1. Export rush and inventory accumulation

• China, Vietnam, and the United States experienced a 20% increase in imports and exports, with industrial production on the rise.
• The Q2 shipments of consumer electronics have been revised upward, but the growth rate is expected to drop to 0-3% in 2025.
• The price of textile and footwear increased by 11.6%, while sales dropped by 10-15%.
• Car Q2 sales hit a record high, but demand may decline in the second half of the year.
• Companies stock up to hedge against risks, as there is a high risk of inventory backlog in Q3 if high tariffs take effect.

2. Market Reaction

• Industrial sector stock prices rose by 3-5%
• Inflation expectations (4-5%) suppress technology stock performance
• Cryptocurrency prices are rising, but facing the risk of a pullback.

Long-term impact ( Q4-2026 )

1. Demand Overdraft and Downturn

• Consumer electronics prices have risen by 10-20%, with shipment volume remaining flat in 2025.
• Tariffs on textiles and shoes have led to a sharp decline in China's exports, with prices rising by 50% and sales dropping by 15%.
• The price of electric vehicles has increased by 10-15%, and sales have declined.

2. Supply Chain Restructuring

• Chinese companies are turning to global South markets, accounting for 30% of global manufacturing.
• American companies rely on the USMCA market, with costs rising by 8-15%.
• The textile industry is shifting to Vietnam/India, the electronics industry is moving to Taiwan/Japan/South Korea/India, and the automotive industry is relocating to Mexico.

3. Periodic Downtrend

• In 2026, the inventory destocking pressure will peak, and the manufacturing cycle will worsen.

4. Market Impact

• Technology stocks/NASDAQ index fell by 5-10%
• Cryptocurrency faces a pullback, but long-term accommodative policies may bring a rebound.

3. Key Observations

1. Soft data such as PMI and price expectations peaked in Q2-Q3, indicating an economic slowdown.
2. Q2 export/industrial production growth 20%, growth rate slows down after Q3
3. Pay attention to the guidance on tariff costs and demand in the Q1 earnings reports of companies like Apple, Nike, and Tesla.
4. The Federal Reserve may slow down interest rate cuts if inflation reaches 4-5%, and tariff exemption policies will affect inventory.

4. Conclusion and Recommendations

1. Short-term export surge pushes up data, but the risk of inventory backlog rises, with prices in industries such as electronics, textiles, and automobiles increasing, while sales decline.
2. In the long term, high tariffs will suppress demand and accelerate supply chain restructuring, with manufacturing costs in the U.S. rising by 8-15%.
3. The inventory pressure peaked in 2026, and the manufacturing cycle is on the decline.
4. In terms of the market, industrial stocks may perform better than technology stocks in the short term; cryptocurrencies fluctuate with inflation expectations and liquidity.
5. It is recommended to pay attention to indicators such as PMI and Q1 financial reports, and to cautiously position in the manufacturing sector, with a focus on beneficiary stocks related to the Southeast Asia supply chain.