Vietnam’s Manufacturing PMI Plunges to Near Two-Year Low: A Warning Sign of Deepening Economic Strain

Economic

Summary:

Vietnam’s Manufacturing Purchasing Managers’ Index (PMI) dropped sharply to 45.6 in April 2025 — the lowest level since May 2023 — as U.S. tariff shocks triggered widespread order cancellations, output cuts, and job losses....

Sharp PMI Decline Signals Defensive Shift in Vietnam’s Manufacturing Sector

April 2025 marked a severe downturn in Vietnam’s manufacturing activity, with the PMI plunging from 50.5 in March to 45.6, according to S&P Global Market Intelligence. This steep drop — the most significant in nearly two years — reflects the immediate impact of new U.S. tariffs, with broad-based declines across key subcomponents including new orders, exports, output, and employment.

The PMI survey, conducted between April 9 and 22, coincided with the enforcement of U.S. tariffs on Vietnamese goods. This external shock led to the sharpest fall in new orders in almost two years. Export orders declined for the sixth consecutive month, registering the steepest drop since June 2023 — a clear sign that Vietnam’s core export-driven manufacturing base is under heavy pressure.

Output and Employment Shrink Rapidly

Output levels reversed course after a brief uptick in March, with April seeing the fastest rate of contraction since January 2023. Businesses scaled back production to align with reduced demand and rising trade uncertainty. Simultaneously, employment in the sector fell for a seventh consecutive month — at the fastest rate in three and a half years — as backlogs were insufficient to sustain current staffing levels.

Faced with declining demand, firms cut back on purchasing activity at the fastest pace since May 2023. Inventories of purchased inputs fell to their lowest level since September 2024, signaling a shift toward preserving liquidity rather than stocking for future orders. This defensive strategy reflects weakened business confidence and heightened caution over capital allocation.

Softening Input Costs Offer Limited Relief

Amidst the downturn, input cost inflation eased considerably. April saw the slowest rise in input prices since the global price surge began in August 2023. Firms cited lower oil and international shipping costs, providing marginal relief to profit margins and possibly improving gross margins by Q2–Q3. However, price cuts to attract customers have continued, marking the fourth straight month of product price deflation — the sharpest in 21 months.

The ongoing price drops, while pressuring short-term profits, help anchor inflation expectations. This may pave the way for more flexible monetary policies in the second half of 2025. Financial support tools such as concessional credit or liquidity restructuring could be expanded to assist businesses coping with trade turbulence.

Investor Implications: PMI as a Lead Indicator of Earnings Cycle

For financial markets, the PMI is more than a technical signal — it serves as a leading indicator of earnings and capital flows. A sustainable rebound in stock valuations and investor optimism will require clearer signs of order stability, production recovery, and input cost control. Once these align, cyclical sectors like logistics, supporting industries, materials, and industrial real estate will likely become focal points for capital reallocation.

As noted by Andrew Harker, Economics Director at S&P Global, it is vital to track Vietnam’s PMI trends in the coming months to understand how the real economy is evolving under stress. This serves as a critical signal not just for manufacturers, but also for policymakers and investors seeking early insights into Vietnam’s economic trajectory.

Source: S&P Global

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Economic

China–U.S. Trade War

Trump Tariffs Drag on Global Growth Amid Mounting Corporate and Economic Strains

President Donald Trump’s aggressive tariff regime is increasingly disrupting the global economic engine that once relied on relatively predictable and open trade. With baseline tariffs at 10% and punitive rates—such as 145% on Chinese goods—many multinational corporations and national economies are now revising their growth forecasts downward, citing the ripple effects of trade uncertainty.

From small e-commerce sellers to global brands like Electrolux, Logitech, Diageo, and Volvo Cars, firms are either exiting key markets or slashing revenue targets. A particularly devastating blow for small exporters came with the elimination of the "de minimis" exemption, which previously allowed shipments under $800 to enter the U.S. duty-free. Cindy Allen, CEO of Trade Force Multiplier, said that “we’re going from zero to 145%, which is untenable for companies and untenable for customers.”

Demand Shock Ripples Through Industrial Economies

The impact is already evident in factory surveys. China's manufacturing activity in April contracted at its fastest pace in 16 months, while the UK posted its sharpest drop in factory exports in nearly five years. Although Germany saw a temporary boost in output, analysts warn this may reflect manufacturers rushing deliveries before new tariffs kick in—signaling a looming downturn.

This “front-loading” effect may also explain India’s unexpected spike in manufacturing activity, but economists like Shilan Shah at Capital Economics note that India may become a strategic winner by absorbing U.S. demand diverted from China. Major U.S. firms like Apple are already shifting supply chains toward India, which faces lower tariff exposure.

Tariff Uncertainty Reaches Central Banks and Governments

The uncertainty is not only disrupting corporate operations but also influencing national economic strategies. The Bank of Japan cut its growth forecast last week, while European and MENA-region forecasters cited tariff risks in their downward revisions. For central banks, the silver lining is that the disinflationary impact of the tariffs might create room for interest rate cuts. The Bank of England, for instance, is expected to lower rates this week.

However, the broader issue remains whether the Trump administration’s trade overhaul can lead to meaningful structural shifts elsewhere. Some economists suggest it may eventually force China to boost domestic stimulus or push the euro zone to resolve internal market inefficiencies. Yet for now, the dominant narrative is one of suppressed demand, lower trade volumes, and heightened business risk.

Outlook: The Longer the Trade War, the Deeper the Drag

While the Trump administration claims it is close to resolving tensions with India, Japan, and South Korea, Beijing has yet to agree to formal talks, despite suggesting it is evaluating Washington’s latest offer. Meanwhile, tariffs on autos, steel, aluminum, and other strategic goods remain in place, weighing heavily on global supply chains.

Isabelle Mateos y Lago of BNP Paribas warns the situation may deteriorate further: “The U.S. tariffs end-game may be further away and at a higher level than previously thought.” With inflation easing but growth lagging, the world economy may continue to stagger under the weight of Trump’s unpredictable trade maneuvering—unless diplomatic breakthroughs are achieved soon.

Source: Reuters

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Catherine Richards

Cryptocurrency

The start of the fresh week trade remains sluggish after experiencing a notable pullback during the weekend. Bitcoin price slashed below $94,000 and seems to be ready for a quick bounce, which may shake up the markets. As Bitcoin consolidated, the top 10 tokens like Ethereum, XRP, BinanceCoin, Cardano, etc., also followed a similar trend and remained glued below their respective resistance levels. Meanwhile, some altcoins display strength, indicating a notable shift in the market sentiment.

Top Gainers for the Day

As Bitcoin began to consolidate, the top altcoins also followed the same trend; meanwhile, some of them worked hard to maintain a strong ascending trend. Core (CORE) price remained the top gainer with nearly 13% profits. With over 133 integrations, the CORE platform is swelling every day. The next is Walrus (WAL), which has surged by over 10% gains after being the top loser during the past weekend. Meanwhile, Flare (FLR), Pudgy Penguins (PENGU), & Fartcoin (FARTCOIN) attracted decent gains, followed by Bonk (BONK) & Sui (SUI).

Top Loser for the Day

The markets are experiencing a corrective phase, where the bears have begun to extract profits from the token that remained bullish in the past few days. With an over 8% plunge, Ethereum Name Service (ENS) price leads, followed by Sonic (prev. FTM S) and BitTorrent (BTT) with a 3% to 4% pullback. However, the loss remained restrictive between 2% and 3% with the other altcoins like Stacks (STX), Render (RNDR), Near Protocol (NEAR), Cardano (ADA) and Ethereum Classic (ETC). This suggests the overall market sentiment remains bullish, and hence, a strong rebound could be imminent.

Regardless of the profit and losses, the community sentiments are extremely bullish on Kaspa (KAS), Cardano (ADA), Pi (PI) and XRP (XRP). The investors foresee a strong ascending trend for these altcoins, probably when Bitcoin's price displays some strength and revives a rise back above $96,000. Therefore, the crypto market prediction for today remains neutral, with the top token maintaining a range-bound consolidation, compelling the top altcoins to follow the trend, while some may thrive with decent gains.

Source: CryptoSlate

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Gerik

China–U.S. Trade War

Deflation Deepens as China Redirects U.S.-Bound Exports Domestically

China is grappling with a deepening deflationary threat as the government encourages exporters—stranded by the collapse of U.S. demand due to tariffs as high as 145%—to shift their goods into the domestic market. While this redirection may temporarily ease supply gluts, it is unleashing steep price cuts, eroding profit margins, and escalating competitive pressures among domestic firms.

According to Barclays economist Yingke Zhou, this shift is sparking an aggressive price war as retailers like JD.com commit billions to absorb tariff-hit inventory. The resulting deflationary pressure is evident: consumer prices fell in both February and March, while the Producer Price Index dropped for the 29th consecutive month, down 2.5% in March and potentially falling 2.8% in April.

Economic Indicators Signal Increasing Stress

Goldman Sachs now forecasts China’s consumer inflation to fall to 0% in 2025, with wholesale prices declining 1.6%—a stark signal of waning pricing power across sectors. The producer deflation aligns with Morgan Stanley’s outlook that the second quarter will bear the brunt of tariff damage, as exporters suspend shipments and slash output.

The oversupply created by vanishing U.S. orders is compounding China’s structural problem of industrial overcapacity. “Prices will need to fall for domestic and other foreign buyers to absorb the excess,” said Goldman’s chief China economist Shan Hui, warning that manufacturers cannot quickly adjust capacity to account for lost U.S. demand.

Employment Faces Blow as Firms Fight to Survive

More than 16 million jobs are tied to goods destined for the U.S., and many of these roles are now at risk. Small and mid-sized exporters, once buoyed by the “de minimis” exemption that allowed duty-free shipments under $800 to the U.S., are now confronting insolvency. That rule was repealed by the Trump administration, leaving companies like Shein and Temu exposed to full tariffs and cash-flow disruptions.

According to Eurasia Group’s Wang Dan, urban unemployment could average 5.7% in 2025—above the official 5.5% target—as job losses mount in coastal regions reliant on exports. Delayed payments, return surges, and razor-thin margins are already forcing some firms to shut down or sell at a loss just to keep operations running.

Beijing Reluctant to Launch Stimulus Despite Mounting RisksDespite growing signs of economic distress, Chinese authorities are reluctant to deploy large-scale stimulus. Analysts suggest the government sees deflation not as a crisis, but as a transitional buffer allowing households to save during broader structural reforms.

This restrained policy posture comes amid simultaneous challenges from a depressed property market, which has undermined household wealth and fiscal revenue. Together, these dual drags threaten to sap momentum from China’s modest 4% GDP growth outlook—already short of the official 5% target.

Nomura’s Ting Lu warns of a “worse-than-expected demand shock,” particularly if trade tensions persist. Although Chinese officials remain optimistic that tariffs will be resolved diplomatically, no timetable has been offered, and talks remain in a tentative phase.

Structural Challenges Threaten Recovery Path

Peking University’s Justin Yifu Lin argues that while China retains industrial advantages, the U.S. will struggle to reshore manufacturing within a year or two, meaning higher prices will burden American consumers before benefits materialize. Meanwhile, China’s challenge lies in managing overproduction and restoring domestic confidence.

In essence, Beijing’s stopgap measure—turning exporters inward—is compounding a new crisis: entrenched deflation, weakening job security, and demand-side fragility. Without stronger domestic consumption or a breakthrough in U.S.-China trade talks, China risks slipping into a deflationary trap with long-term economic consequences.

Source: CNBC

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Economic

Inflation Stubbornly Above Target as ECB Eyes June Rate Cut

The European Central Bank (ECB) faces mounting pressure to recalibrate its monetary strategy as Eurozone inflation remains persistently above target. According to newly released data from Eurostat, the region’s consumer price index in April held steady at 2.2% year-on-year, marking the sixth consecutive month inflation has exceeded the ECB’s 2% target. This has raised uncertainty over the timing and scale of future interest rate adjustments, even as markets largely price in a 0.25 percentage point rate cut at the June policy meeting.

What complicates matters further is the steady rise in core inflation—excluding energy and food—which accelerated to 2.7% from 2.4% in March. The figure not only surpassed economists’ consensus of 2.5% but also signals that underlying price pressures are re-emerging. More striking is the spike in service inflation, which climbed to 3.9% from 3.5%, suggesting that pricing power in labor-intensive sectors remains robust.

Temporary Drivers vs Persistent Trends

While the uptick in service inflation may appear alarming, analysts at Capital Economics argue that it likely reflects seasonal demand spikes during the Easter holiday period, particularly in travel, dining, and hospitality. Therefore, it may not be a sustained inflationary trend that warrants policy tightening. This view is crucial for maintaining expectations of continued monetary easing despite headline inflation resilience.

Still, the challenge for the ECB lies in distinguishing temporary effects from structural inflation dynamics. The institution has to navigate carefully between overreacting to seasonal volatility and underestimating sticky service-sector price growth, which could complicate its inflation control objectives over the medium term.

Markets Still Expect Rate Easing Despite Data Surprises

Despite the inflation surprise, financial markets remain confident in the ECB’s dovish trajectory. Futures trading now reflects an 85% probability of a 0.25% rate cut in June, with at least two or three additional cuts priced in for the remainder of the year. This sentiment is anchored by the view that inflation will gradually normalize and that economic growth in the Eurozone remains too fragile to withstand prolonged restrictive monetary policy.

Supporting this outlook, German two-year bond yields—often viewed as a barometer for short-term interest rate expectations—rose only marginally by 0.04 percentage points to 1.74% following the data release. This muted reaction underscores market confidence in an upcoming rate reduction cycle.

Growth Momentum Fragile Amid Global Trade Tensions

The ECB’s policy dilemma is further complicated by external risks, particularly U.S. tariff policies that threaten to disrupt trade flows and weigh on regional growth. Last month, the central bank initiated its first rate cut since the pandemic, lowering the benchmark rate to 2.25% as a preemptive response to these emerging trade tensions. This shift reflected not just concerns over inflation but also a broader strategy to shield the Eurozone economy from the knock-on effects of geopolitical and policy-driven shocks.

Preliminary GDP data for the first quarter of 2025 showed a modest 0.4% growth—an improvement over earlier expectations but still insufficient to confidently absorb further external shocks. This performance affirms the ECB’s cautious stance, highlighting the need to support demand while remaining alert to inflationary risks.

As June approaches, the ECB must carefully weigh its next steps. While market pricing leans toward further easing, inflation indicators—particularly in the services sector—suggest that the path to price stability remains uneven. The real test will be whether the ECB can balance short-term growth support with medium-term credibility on inflation control. With U.S. tariffs adding a new layer of uncertainty, policymakers will need to signal their intentions with clarity, while maintaining flexibility in the face of evolving global dynamics.

Source: Reuters

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Economic

Vietnam Raises Alarm Over Tariff Fallout

Vietnamese Prime Minister Pham Minh Chinh issued a strong rebuke on Monday against the sweeping "reciprocal" tariffs enacted by U.S. President Donald Trump, warning that these measures are creating significant turbulence for the global economy. Addressing the National Assembly in Hanoi, Chinh pointed to a 46% tariff on Vietnamese exports as an immediate threat to both domestic resilience and broader international trade networks.

Vietnam, which has long relied on stable global demand and open trade to fuel its rapid economic development, is now confronting what Chinh described as a “challenging and complicated situation.” The tariffs, he warned, are not just bilateral penalties but carry wider implications for regional supply chains and multilateral trade cooperation.

Global Implications of U.S. Protectionism

While the full enforcement of these tariffs has been deferred globally until July, the Prime Minister emphasized that the psychological and operational effects are already unfolding. Exporters are facing heightened uncertainty, and foreign investment prospects are beginning to show signs of hesitation as trade risks escalate.

The situation reflects an emerging pattern where trade-dependent economies are becoming collateral damage in broader geopolitical maneuvers. The U.S. tariff structure under the Trump administration has aimed to address perceived imbalances, but in doing so, it has also triggered instability in supply chains that rely on efficiency, cost optimization, and predictability.

Diplomatic Response and Negotiation Outlook

Despite the headwinds, Chinh signaled cautious optimism. He noted that Vietnam has maintained composure and strategic patience in its response, opting for diplomacy and negotiation over retaliation. Notably, Vietnam is among the first nations with which the U.S. has agreed to initiate formal tariff discussions, suggesting a potential opening for compromise.

“We have stayed calm and courageous and taken several appropriate measures,” Chinh told the assembly. His remarks underline Vietnam’s attempt to position itself as a cooperative yet resilient partner, seeking dialogue rather than escalation. The Vietnamese government has reportedly made meaningful progress in its consultations with the Trump administration, although the details of any concessions or adjustments remain undisclosed.

Vietnam’s Economic Dilemma: Integration Meets Isolation RiskThe contradiction facing Vietnam is sharp. As a country deeply integrated into global manufacturing chains—particularly in electronics, textiles, and intermediate goods—its growth model depends on open markets. The tariffs, if sustained, could erode Vietnam’s competitiveness, particularly if firms choose to shift production elsewhere to avoid levies.

The timing is particularly sensitive. Vietnam’s economy has faced mounting pressures from softening global demand, logistical bottlenecks, and now, tariff unpredictability. Moreover, potential shifts in investor confidence could have long-term consequences, especially as Vietnam seeks to scale up high-tech manufacturing and move up the value chain.

A Test of Vietnam’s Strategic Agility

Vietnam’s diplomatic and economic response to the Trump tariffs will serve as a litmus test for its broader strategy of maintaining balanced relations with major powers while preserving export competitiveness. Although the willingness of the U.S. to enter negotiations offers a temporary reprieve, the larger issue of trade weaponization and shifting global supply chains will likely persist well beyond this tariff cycle.

As Vietnam navigates these challenges, its ability to secure trade concessions without compromising long-term development goals will determine how effectively it can insulate itself from external shocks in an increasingly protectionist world.

Source: Reuters

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Forex

Economic

Taiwan Dollar’s Rally Spurs Regional Currency Strength

The U.S. dollar opened the week under pressure as the Taiwanese dollar skyrocketed more than 3% on Monday, building on Friday’s record 4.5% surge to hit 29.618 per dollar—its strongest level in two years. This abrupt move has spilled over to other regional currencies, fuelling talk that some Asian governments may be tacitly allowing their currencies to appreciate in hopes of softening the tone of U.S. trade negotiations.

Although Taiwan’s central bank denied that the U.S. has requested such currency adjustments as a bargaining tool, market participants have begun pricing in a broader pattern. China’s yuan followed suit, appreciating to 7.1980 per dollar—its strongest level in nearly six months—on speculation that Beijing could allow a stronger exchange rate as a goodwill gesture amid tense trade talks.

U.S. Trade Policy Fuels Uncertainty and Currency Volatility

Despite the upward momentum in Asian currencies, a concrete breakthrough in trade talks remains elusive. China’s Commerce Ministry confirmed it is evaluating a U.S. proposal to resume negotiations following the imposition of 145% tariffs by President Donald Trump, but meaningful dialogue still seems distant. In a televised interview aired Sunday, Trump reaffirmed that China “wants to make a deal,” yet he provided no timeline or policy clarity.

These inconsistencies have left the dollar exposed. Recent remarks by Trump calling for lower interest rates and disparaging Federal Reserve Chair Jerome Powell—whom he called a “stiff”—have renewed concerns over the Fed’s independence. While Trump stated he would not attempt to remove Powell, markets remain wary of political interference.

Federal Reserve in Focus, But Rate Cut Expectations Decline

With the Federal Reserve set to meet this Wednesday, the market overwhelmingly expects no change in rates. However, stronger-than-expected U.S. labor data last week has further dampened the chances of a rate cut in June. According to JPMorgan’s Michael Feroli, the Fed is now more likely to stay on hold, given the dual risk of inflation persistence and trade-induced volatility.

Market-based probabilities of a rate cut in June have dropped from 64% a month ago to 37% currently, with institutions like Goldman Sachs and Barclays pushing their expected cut to July. Despite this, the dollar has failed to sustain momentum from the positive payrolls report, highlighting the extent to which tariff anxiety continues to weigh on investor confidence.

Currency Markets React to Uncertainty and Geopolitical Shifts

Broader currency movements reflect this uncertainty. The euro edged up to $1.1333, recovering from last week’s low, while the dollar index dipped to 99.717. The yen also gained, with the dollar slipping 0.4% to 144.21 yen, after Japanese Finance Minister Katsunobu Kato downplayed earlier comments suggesting Japan might reduce its U.S. Treasury holdings amid trade disputes.

Investor positioning further reveals fragility in sentiment. Speculative short positions on the dollar have increased, suggesting broader bearishness, but this also raises the risk of sudden reversals if unexpected bullish news emerges. Monday’s release of the U.S. ISM services data could be a turning point; a weak reading would reinforce fears of a downturn, while a strong result might offer temporary support for the greenback.

Pound, Aussie, and Scandi Currencies Also in Spotlight

Sterling is likely to face its most significant test at the upcoming Bank of England meeting, where a 25-basis-point rate cut to 4.25% is widely expected. Markets are looking for signals about whether the BoE will open the door to back-to-back cuts, potentially bringing rates down to 3.50% by year-end.

Elsewhere, the Australian dollar continued to firm, bolstered by the Albanese government’s reelection and improved global risk appetite. The currency touched $0.6466—its highest in five months—after the U.S. payroll data sparked a mild rally in risk assets.

Dollar’s Slide Underscores Erosion in Market Confidence

The weakening dollar reflects more than just technical shifts in exchange rates; it signals a deeper unease about the U.S.'s shifting trade policies, political pressure on the Fed, and unpredictability in global economic coordination. The surge in the Taiwan dollar and accompanying regional appreciation may mark a new phase in trade diplomacy—where currencies are wielded not just as monetary tools but as instruments of negotiation.

Until clearer signals emerge from the Fed and the White House, dollar sentiment is likely to remain fragile, driven by geopolitical posturing and speculative expectations more than economic fundamentals.