China's factory activity in May shrank for the first time in eight months, a private-sector survey showed on Tuesday, indicating U.S. tariffs are now starting to directly hurt the manufacturing superpower.

China has grappled with entrenched deflationary pressure, as a prolonged real estate downturn and job insecurity hamper investments and consumer spending.

A private gauge of China’s manufacturing activity tumbled in May, touching the lowest level since September 2022 as tariffs continue to weigh, despite the U.S. trade truce. The Caixin manufacturing purchasing managers index signaled a contraction for the first time in eight months.