China’s unsettling anticipation of an economic winter trade war thawed ever so slightly following the import and export surge in the first quarter of 2025. China’s economy outperformed what was thought possible and marked considerable strength during the first three monthsof the year, surpassing market estimates. Not surprisingly, this leap was primarily the result of heavy batched shipments in exports as last minute attempts were made to push goods out of global businesses before the enforcement of international tariffs coming from Washington.
However, this growth is underpinned by the sustainability question in the long-run given the fog on the horizon of never-ending conflict over trade.
A Strong Start: Economic Growth Outperforms Expectations
During the initial three months of 2025, the measurement epoch, the People’s Republic of China registered Adds in Imports and Exports Account and posted a breathtaking 5.4 percent year on year growth, therefore outperforming the China government and policymaker’s own set expectations of the yearly goal of “around 5%.” China’s performance also provided respite, even if temporary, to jittery global markets suffering from Pessimism driven by conflict over trade.
Export Boom: A Race Against The Clock
In China’s economic landscape, the National Bureau of Statistics reported a 1.2% boost in GDP growth for the country during the last quarter of 2024. One of the most important contributing factors to this growth was the exports sector, which increased by 6.9% year on year in the first quarter. This growth was even sharper in March, when exports surged 13.5% as businesses sought to fulfill orders prior to tariff deadlines hitting.
Domestic Drivers: Industrial Production and Retail Sales
There was also some improvement in industrial production aiding the Q1 results, up 6.5% year on year. Measures of consumer spending, such as retail sales, increased by 4.6%, bolstered by government initiatives like broader trade-in programs.
Property Woes: A Drag On The Economy
At the same time, these numbers highlight fewer areas of the Chinese economy that are stagnant or failing to grow rapidly. While investments made in fixed assets grew by 4.2% along with spending on the business sector, investment in the real estate shrank dramatically by 9.9%. “This cratering property market remains front and center of households’ concerns,” says Moody’s Analytics economist Sarah Tan, pointing out a fragile labor market that shifts household priorities towards saving rather than spending.
The shadow of the tariff threat: A not so distant boom
China’s economy is experiencing its fair share of challenges with Tan commenting on the instability of the housing market saying “Any recovery will be uneven and shaky.” With Trumps policies trumping trade war, exports and investment are expected to take a hit, leading to a stagnant China.
Analysts’ Concerns: A Collective Re-evaluation of China’s GDP
Prolonging the trade war debate is a surefire way to make investors wary of China’s GDP. From a Morgan Stanley perspective, a lowered estimate of 4.2% in 2025 marks a worrying decline domestestically due to tariff induced spending. This further deepens the concern regarding ever worsening demand.
The Tariff Problem: A Quickly Changing Maze of Sausages and Hotdogs
Strained economic relations between the US and China do not make things easier considering they are economically at war with each other. With the US increasing its tariffs on Chinese goods, some deeming the 145% benchmark unjustifiably, China is sceptical about further integrating these policies into their economy to remove the risk of international market bombardment and induce even slower global growth.
Key Takeaways: The Challenge of Managing Economic Growth While Balancing Risk.
China’s economy shocked the world with unexpected growth in Q1 2025 due to a spike in exports. Still, the potential for increasing U.S. trade conflict poses a significant risk. For the State of China, managing the effects of tariffs and operating within the geopolitical framework of international trade will be the deciding factors as to how China’s economy progresses for the remainder of the year.
