Mounting evidence points to a grim reality for China’s economy. Once hailed as the world’s growth engine, China may now be teetering on the edge of a depression. A combination of collapsing exports, skyrocketing unemployment, and vanishing economic data is raising red flags for economists across the globe. Many are asking whether President Trump’s aggressive tariff strategy is behind the unraveling, and if China’s government is trying to hide just how bad things have become.

The Power of Tariffs

The Biden-era trade war may have softened, but Trump’s 2025 tariff escalation has returned the pressure with force. The latest round of universal tariffs—first announced April 2—includes sweeping levies of up to 145 percent on Chinese goods. This has gutted demand from American importers almost overnight.

According to Li, a garment exporter in Guangzhou, “The customer didn’t say anything. There was nothing we could do either. The order simply disappeared.” Before the tariffs, Li’s small factory brought in over $137,000 a month. Now, he’s struggling to stay afloat in China’s cutthroat domestic market.

Trump’s strategy appears to be working. Rod Martin, CEO of Martin Capital, said, “Beijing will have to make a deal at some point, or this recession does turn into a depression.” William Lee of the Milken Institute added that Xi Jinping may have no choice but to prop up exporters by increasing debt—digging an even deeper financial hole.

Exports Collapse and Production Shrinks

Exports made up one-third of China’s economic growth last year, making the United States—its largest customer—a critical partner. With that market effectively cut off, the fallout has been swift. In April, bookings for ocean containers from China to the U.S. fell by 60 percent.

The damage is also reflected in China’s official factory activity numbers. The April manufacturing PMI dropped to 49, indicating contraction. It was the sharpest monthly decline in two years.

Even before the latest tariffs, 2023 exports had already fallen by 5 percent, with only a temporary 6 percent rebound in 2024 as importers scrambled to beat the April deadline.

A Hidden Recession?

While Beijing still claims the economy is growing at 5 percent annually, few economists believe that number. Rhodium Group estimates actual GDP growth in 2024 was between 2.4 and 2.8 percent. Goldman Sachs pegs it at 3.7 percent, still well below what China needs to maintain employment.

“For China, having a GDP growth less than 4 percent is already a recession,” said William Lee, because that level can’t support its growing workforce or recent college graduates.

The stimulus tells its own story. China issued over $1.4 trillion in economic support in 2024—an amount that, according to Rhodium’s Daniel Rosen, signals the country may have had zero or even negative real growth.

Frank Xie, a professor at the University of South Carolina Aiken, believes China may already be in a state of depression, pointing to prolonged wage losses and high unemployment.

Vanishing Jobs and Youth Unemployment

The labor market is worsening. Treasury Secretary Scott Bessent warned that China could lose 10 to 20 million jobs if the tariffs remain. In June, over 12 million students will graduate from college, with more than half expected to enter an already strained job market.

China’s official youth unemployment rate was 16.5 percent in March. But the figure is widely considered to be manipulated. When the number hit 21.3 percent in 2023, Beijing simply stopped reporting it. Later, the government resumed publishing a new series that excluded students—dropping the number to 14.9 percent on paper, but not in reality.

Economist Zhang Dandan of Peking University previously estimated the real youth unemployment rate might be as high as 46.5 percent.

Why China Is Hiding the Numbers

What makes the economic picture even murkier is the increasing lack of reliable data. The Chinese government has stopped publishing hundreds of data points once considered essential for evaluating the economy. Among them: land sales, foreign investment, unemployment insurance, corporate registry info, and even the number of cremated bodies.

The Wall Street Journal reports that China’s National Bureau of Statistics has not explained why so many figures have disappeared. Many experts believe the motivation is political. Xi Jinping’s administration is trying to protect the image of stability while the economy unravels.

This secrecy is nothing new. Former Premier Li Keqiang once told the U.S. ambassador that GDP figures were “for reference only,” preferring to monitor electricity use, freight volume, and bank loans instead.

Today, economists use alternate methods to gauge China’s health—like satellite images, electricity production, and even news reports about gym and beauty salon closures.

A Depression in Disguise?

China’s current economic woes go beyond temporary recession. The country’s real estate crash has wiped out billions in household wealth. Developers have gone bankrupt, protests have erupted, and the government has halted publication of housing vacancy rates and land sale values.

The domestic market, already weakened by deflation and lack of consumer confidence, cannot absorb the glut of goods previously made for export. A shoe factory in Guangdong now markets its products on social media, stripped of name-brand logos, in a desperate attempt to survive.

With exports down, jobs vanishing, and critical data disappearing, it’s hard to ignore the possibility that China is no longer just struggling—it may be slipping into a depression.

Economist Yeh Yao-Yuan summarized it bluntly: “It’s only a matter of time before the Chinese economy enters a depression.” And if Trump’s tariffs hold, that time may be now.