factories

Factory activity in the Eurozone expanded for the first time since mid-2022 due to domestic demand offseting the impact of U.S. tariffs.

However, mixed signals were reported over the Chinese economy, with one survey suggesting modest expansion, contradicting an official readout that showed activity continuing to shrink. Export powerhouses Japan, South Korea, and Taiwan all saw manufacturing activity shrink in August, underscoring the challenge Asia faces in weathering the hit from sharply higher trade barriers erected by U.S. President Donald Trump.

In Europe, Greece and Spain led factory growth, while manufacturing in Germany shrank at a slower pace. The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to an over-three-year high of 50.7 in August from 49.8 in July.

However, the recovery is still fragile, with inventory levels continuing to decline and order backlogs dropping. Manufacturing in Germany rose to a 38-month high of 49.8, offering hope for the economy that shrank 0.3% last quarter on slowing demand from its top trading partner the U.S.

The EU and the U.S. struck a framework trade deal in late July, but only the baseline tariff of 15% has so far been implemented.

ASIA

The S&P Global Japan Manufacturing Purchasing Managers’ Index (PMI) and South Korea’s factory activity have both fallen for the seventh consecutive month due to higher US tariffs and competition from cheap Chinese exports.

Both countries have struck trade deals with the US, which have eased pressure on their export-reliant economies. This has led to a double-whammy for Asian economies, as they face higher tariffs and competition from cheap Chinese exports.

The RatingDog China General Manufacturing PMI unexpectedly rose to 50.5 in August, exceeding the 50-mark that separates growth from contraction. This contradicts an official survey that showed activity shrank for a fifth straight month due to weak domestic demand and uncertainty over Beijing’s trade deal with the US.

Trump extended his tariff truce with China for another 90 days, withholding imposition of three-digit duties until November 10. India, which grew at a much better-than-expected 7.8% in the last quarter, continues to be a significant outlier in the region, with manufacturing activity expanding at its fastest pace in over 17 years.

With information from Reuters

MASERU, Lesotho — The southern African nation of Lesotho has had its U.S. export tariff reduced from a threatened 50% to 15%, but its crucial textile industry still faces massive factory closures, officials said Friday.

Despite a reduction announced by President Trump, the country’s textile sector says it remains at a competitive disadvantage and faces ongoing factory closures and job losses.

In April, the Trump administration announced a 50% tariff on imports from Lesotho, the highest among all countries.

The tariffs were paused across the board, but the anticipated increase wreaked havoc across the country’s textile industry, which is its biggest private-sector employer with more than 30,000 workers.

About 12,000 of them work for garment factories exporting to the U.S. market, supplying American retailers such as Levi’s and Wrangler.

The Associated Press reported this week that clothing manufacturer Tzicc has seen business dry up ahead of the expected tariff increase, sending home most of its 1,300 workers who have made and exported sportswear to American stores, including JCPenney, Walmart and Costco.

David Chen, chairperson of the Lesotho Textile Exporters, has warned that the U.S. government’s move to reduce the tariffs offers little relief for the struggling industry as their competitors have lesser tariffs.

“Other countries which we are competing against are already being charged 10%, which makes it difficult for us to compete on an equal footing,” said Chen, singling out the East African country of Kenya as its strongest competitor with a more favorable 10% tariff.

“As a result, many factories will have to shut down,” Chen said. “They had already been forced to lay off workers when the tariffs were first announced in April.”

According to the Office of the U.S. Trade Representative, in 2024, U.S.-Lesotho bilateral trade stood at $240.1 million. Apart from clothing, Lesotho’s exports also include diamonds and other goods.

Lesotho is classified as a lower-middle-income country by the World Bank, and nearly half of its 2.3 million population live below the poverty line, while a quarter are unemployed.

Lesotho’s minister of Trade, Industry and Business Development, Mokhethi Shelile, said that while several meetings with U.S. trade representatives led to a reduced tariff, more needed to be done to lower it further.

“We remain committed to pushing for a further reduction to the minimum tariff level of 10%, which is essential for our textile sector to compete effectively in the U.S. market,” he said. “I have already communicated with the U.S. Embassy regarding continued negotiations.”

Lesotho’s neighbor and trading partner, South Africa, is also reeling after Trump announced a reciprocal 30% tariff for the country, which is expected to significantly affect its agriculture and manufacturing sectors, among others.

Phakela writes for the Associated Press.