China’s economy grew faster than expected in the first quarter of 2025, showing resilience even before a new wave of U.S. tariffs took full effect. According to the National Bureau of Statistics (NBS), China’s gross domestic product (GDP) rose by 5.4% year-on-year in Q1, beating market forecasts of 5.1%.
The strong growth was driven by steady exports, increased factory activity, and better-than-expected consumer spending. This comes as tensions rise between China and the United States over tariffs imposed by former President Donald Trump.
“The national economy had a steady and good start,” said Sheng Laiyun, Deputy Director of the NBS. “However, the external environment is becoming more complex, and domestic demand remains weak.”
U.S. Tariffs Yet to Show Full Impact
In early 2025, the U.S. government introduced two rounds of tariffs totaling 20% on Chinese goods. These were specifically tied to fentanyl-related trade concerns. By April, Washington expanded the measures, bringing total tariffs on Chinese imports to over 145%.
China’s Q1 economic data does not reflect the impact of these latest tariffs. Sheng noted that while these measures may add pressure, they “cannot change the trend of China’s long-term economic growth.”
“China has a stable foundation, strong resilience, and great potential,” he said. “We are confident in achieving our development goals.”
Retail and Industrial Growth Surpasses Forecasts
Consumer spending and factory output also performed better than expected. In March:
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Retail sales rose 5.9% compared to the same time last year.
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Industrial production grew 7.7%, up from 5.9% in January–February.
These figures suggest that domestic consumption and production are rebounding, despite concerns about inflation, property sector instability, and consumer caution.
Export Momentum May Slow Down
Export activity surged in late 2024 and early 2025, as foreign buyers rushed to place orders before tariffs hit. In March alone, China’s exports grew 12.4% year-on-year.
However, economists warn this growth will likely cool in the coming months.
“The tariff shock poses unprecedented challenges to China’s exports,” wrote Tao Wang, Chief China Economist at UBS. “We expect major adjustments in the domestic economy.”
UBS has cut its 2025 growth forecast for China to 3.4%, down from 4%. The downgrade assumes continued tariffs and possible stimulus measures from Beijing.
Goldman Sachs and Capital Economics Adjust Forecasts
Goldman Sachs also lowered its outlook for China’s economy. The bank now predicts:
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4% growth in 2025,
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3.5% growth in 2026,
both down from earlier estimates of 4.5% and 4%.
Meanwhile, Capital Economics economist Zichun Huang expects new policies to help maintain growth above 4%. She pointed to the March budget, which allows for more government spending and future monetary easing.
“More fiscal support and easier lending conditions are likely on the way,” she said.
China Focuses on Trade Diversification
Facing trade tensions with the U.S., China is turning to other global markets. NBS data shows China’s exports to the U.S. dropped from 19.2% of total shipments in 2018 to 14.7% in 2024.
“A diversified market pattern is taking shape,” Sheng noted. “Our dependence on a single export market is falling, making our trade more resilient.”
China’s total exports still grew 6.9% in Q1, despite global headwinds.
Leadership Shifts and Diplomatic Moves
In a key government shakeup, Li Chenggang has been named as China’s new international trade negotiator and Vice Commerce Minister. He replaces Wang Shouwen, who played a major role during Trump’s earlier trade war.
At the same time, President Xi Jinping is touring Southeast Asia. His goal is to position China as a reliable trade partner amid geopolitical tensions. During talks with Vietnam’s leaders, Xi emphasized cooperation on global supply chains and free trade.
In 2023, the Association of Southeast Asian Nations (ASEAN) became China’s top export market, overtaking both the U.S. and the EU.
China’s early 2025 growth figures offer a rare boost of confidence, showing that the country’s economy can still grow despite external pressure. But with new U.S. tariffs now in effect, many economists expect slower growth in the months ahead.
Beijing is expected to respond with more domestic stimulus, export diversification, and deeper ties with Southeast Asia and other trading blocs.
