The rapid de-escalation in the U.S.-China trade war after the Geneva talks has helped Beijing avoid a nightmare scenario: mass job losses that could have endangered social stability - what the ruling Communist Party sees as its top-most priority, key to retaining its legitimacy and ultimately power.
But this year's U.S. tariff hikes of 145% left lasting economic damage and even after the Geneva talks remain high enough to continue to hurt the job market and slow Chinese growth, say economists and policy advisers.
"It was a win for China," a policy adviser said of the talks, speaking on condition of anonymity due to the topic's sensitivity. "Factories will be able to restart operations and there will be no mass layoffs, which will help maintain social stability."
But China still faces challenging U.S. tariffs of 30% on top of duties already in place. "It’s difficult to do business at 30%," the adviser added. "Over time, it will be a burden on China’s economic development."
Lu Zhe, chief economist at Soochow Securities, estimates the number of jobs at risk has fallen to less than 1 million from about 1.5-6.9 million before the tariff reduction.
Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis, had estimated the triple-digit tariffs could cause 6-9 million job losses. Current tariff levels could trigger 4-6 million layoffs, while if tariffs drop by a further 20% some 1.5-2.5 million jobs could be lost, she said.
China's 2025 economic growth could slow by 0.7 percentage points in the most optimistic scenario, 1.6 points under the current tariffs, or 2.5 points if the conflict returns to April's intensity, she estimated.
Government advisers say China is trying to mitigate manufacturing job losses with higher state investment in labour-absorbing public projects and by using the central bank to channel financial resources where new jobs could be created.
The People's Bank of China last week unveiled a new tool to provide cheap funds for services and elderly care, among other stimulus measures.
"On employment, the most important driver will come from increased government investment given that the enthusiasm for corporate investment has yet to rise," said Jia Kang, founding president of the China Academy of New Supply-Side Economics.
Beijing will try to keep the budget deficit ratio at the roughly 4% level agreed in March, but a higher number "cannot be ruled out if a serious situation arises," he said.
The exact impact of last month's tariff spike on the job market is unknown. A factory activity survey predicted employment declined in April, but analysts believe Beijing was more concerned about a potential acceleration of job losses than the absolute numbers over the course of a month.
Exporters had already been paring back their workforce to stay competitive in what risks turning into a deflationary spiral. A major stumbling block to job creation is the perceived unpredictability of U.S. President Donald Trump's tariff policies, which is keeping exporters cautious, analysts say.
