China’s economy has outperformed forecasts in the first quarter of 2025, as exporters rushed to shift goods ahead of impending US tariffs. However, authorities have cautioned that the economy still faces “certain pressures” due to the ongoing trade conflict with the United States.
The tit-for-tat tariff exchanges between Beijing and Washington have escalated dramatically in recent months. The United States has imposed tariffs of up to 145% on Chinese imports, while China has retaliated with a 125% tariff on US goods. This trade war, ignited by former US President Donald Trump’s aggressive tariff policies, has created a volatile global economic environment, particularly impacting China’s economic recovery.
Despite the mounting trade tensions, China’s official data for the first quarter of 2025 provided a glimpse into the nation’s economic resilience. According to the National Bureau of Statistics (NBS), China’s gross domestic product (GDP) grew by 5.4% year-on-year, surpassing the 5.1% growth predicted by analysts.
In a statement, Sheng Laiyun, Deputy Commissioner of the NBS, acknowledged that “the imposition of high tariffs by the US will put certain pressures on our country’s foreign trade and economy,” but emphasized that this would not derail China’s long-term growth trajectory.
Retail sales, a key indicator of consumer demand, saw a 4.6% increase, surpassing expectations. This growth was attributed to the Chinese government’s continued efforts to stimulate domestic consumption following years of sluggish spending. Additionally, industrial output surged by 6.5% in the first quarter, a significant increase from the 5.7% reported in the final quarter of 2024.
However, Beijing has warned that the global economic landscape is becoming “more complex and severe,” and that “proactive and effective macro policies” will be essential to sustain growth and boost consumption moving forward. The NBS also noted that the foundation for sustained economic recovery remains fragile, urging continued efforts to consolidate growth.
As part of its broader economic strategy, Beijing has appointed Li Chenggang, a former Chinese representative to the World Trade Organization, as its new trade envoy. This move comes as part of China’s efforts to navigate the increasingly difficult terrain of global trade and manage its strained relationship with the United States.
Exports surged by more than 12% in March, driven largely by a surge in “front-loaded” orders ahead of Trump’s “Liberation Day” tariffs, which took effect on April 2. Analysts suggest that the impact of these tariffs will not be fully felt until the coming months, with some predicting more grim data as the trade war intensifies.
“The damage from the trade war will show up in the macro data next month,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. Steve Innes, managing partner at SPI Asset Management, echoed this sentiment, noting that much of the growth seen in the first quarter was driven by preemptive stockpiling and export activity aimed at avoiding the new tariffs.
China’s economy, the world’s second-largest, had already been struggling to rebound from the pandemic-induced slowdown, and the rise in tariffs has only added to the challenges. The Chinese government’s stimulus measures in 2024, including interest rate cuts and financial support for local governments, did little to inspire sustained optimism, as markets remained cautious and uncertainty persisted.
China’s leadership has set a growth target of around 5% for 2025, but many economists view this target as ambitious given the numerous hurdles the country faces. Despite these challenges, the government remains confident in its ability to achieve its goals.
“We have the strength, capability and confidence to face external challenges and achieve our set development goals,” said Sheng of the NBS.
As the world watches closely, China’s next moves will be pivotal in determining whether it can continue to withstand the pressures of the trade war and return to a path of sustained growth.