China’s Economy Shows Resilience Despite Looming Tariff Pressures

China’s economy displayed stronger-than-expected growth in the opening months of 2025, with industrial production, investment, and consumer spending all surpassing forecasts. However, challenges remain, as ongoing property sector struggles and looming U.S. tariffs under President Donald Trump’s new trade policies threaten to slow momentum.

 

Key Economic Gains Despite Global Uncertainty

Official data from China’s National Bureau of Statistics (NBS) revealed that retail sales grew 4% year-on-year in January and February, marking the highest increase since October 2024. Industrial output also rose by 5.9%, exceeding analyst expectations, while fixed-asset investment expanded 4.1%, reflecting increased government-driven infrastructure projects.

This positive economic start to 2025 suggests Beijing’s pro-growth policies implemented last year are continuing to drive recovery. However, with the U.S. ramping up tariffs on Chinese goods, concerns over export slowdowns and deflation risks remain at the forefront.

 

Trump’s Tariffs and the Threat to China’s Growth

President Trump’s decision to reintroduce steep tariffs on Chinese goods has reignited tensions between Washington and Beijing. While China’s export sector experienced record shipments totaling $540 billion in the first two months of 2025—likely due to companies rushing orders ahead of tariff hikes—experts warn this could be short-lived.

“China has a history of meeting its economic targets, but with new U.S. trade barriers in place, more policy interventions will be necessary to sustain growth,” said Lynn Song, chief economist for Greater China at ING Bank.

Several analysts, including those at Australia & New Zealand Banking Group, have raised China’s GDP forecast for 2025 following the latest data. Projections now range between 4.7% and 4.8%, up from previous estimates of 4.3%.

 

Challenges Persist in Property and Employment Sectors

While certain economic indicators show strength, China’s real estate crisis remains a significant drag on growth. The property sector contracted by 9.8% in the first two months of the year, with home sales continuing to decline. This prolonged slowdown threatens overall consumer confidence and economic stability.

At the same time, unemployment is on the rise, signaling underlying vulnerabilities. Manufacturing jobs—which rely heavily on exports—are particularly at risk if U.S. tariffs further weaken demand for Chinese goods.

 

Government Response: Stimulus and Consumer Spending Boosts

To counteract external pressures, China is doubling down on stimulus measures to encourage domestic consumption. Recent government programs include:

Expanded consumer trade-in subsidies, encouraging purchases of home appliances, furniture, and electronics.
Increased fiscal spending on public infrastructure projects to drive job creation.
New initiatives to revive household spending, including a government-backed plan to boost consumer confidence.

“These policies aim to shield the economy from external shocks like U.S. tariffs,” said Jacqueline Rong, chief China economist at BNP Paribas. However, she cautioned that the impact of trade restrictions will become more evident in the coming months.

 

Market Reaction: Cautious Optimism

Despite stronger-than-expected economic data, financial markets reacted cautiously:

The CSI 300 Index fell 0.3%, reflecting investor concerns over long-term trade uncertainties.
The offshore yuan weakened 0.1%, indicating persistent worries over capital outflows.
Chinese 10-year bond yields climbed five basis points to 1.88%, reaching a weekly high.

Analysts suggest that while China’s near-term growth outlook is stable, investors are awaiting clearer policy signals from Beijing before making significant moves.

 

What’s Next? Policy Measures in Focus

Looking ahead, economists expect the Chinese government to introduce additional economic measures in the coming months. According to Citigroup analysts, China may:

Cut the reserve requirement ratio (RRR) for banks in the next quarter to inject liquidity into the economy.
Implement interest rate reductions to encourage borrowing and investment.
Unveil Supply-Side Reform 2.0, aimed at reducing excess capacity in struggling industries.

“All eyes will be on China’s mid-year Politburo meeting, where policymakers will assess the need for further stimulus,” Citigroup economists wrote in a report Monday.

 

Conclusion: A Fragile Recovery with Global Risks

China’s strong economic start in 2025 suggests resilience amid domestic reforms and stimulus efforts. However, Trump’s tariffs, a slowing property market, and employment concerns could still derail recovery efforts.

As Beijing navigates these challenges, the world will be watching closely to see whether China can sustain its growth trajectory or if external pressures will force a more dramatic policy shift.