China’s economy expanded by 5.4% in the first quarter of this year, according to official data released on Tuesday. This growth came as producers rushed to frontload exports in an effort to avoid higher tariffs imposed by U.S. President Donald Trump, marking the country’s first economic figures since the start of the ongoing trade war.
The GDP growth for the first quarter matched the growth seen in the fourth quarter of last year and surpassed Beijing’s 5% growth target for 2025, exceeding the 5.1% forecast set by analysts in a Reuters poll. Despite the growth, China faces a challenging economic environment, with households still grappling with the fallout from a severe property sector slowdown.
The trade tensions with the United States have cast a shadow over the outlook for the Chinese economy, threatening a full decoupling between the two largest global economies. Trump’s tariffs, which have been a cornerstone of his administration’s economic policy, have hit Chinese exports hard. In response, Chinese producers have frontloaded their shipments, sending goods abroad ahead of expected tariff hikes.
The U.S. has imposed additional tariffs of up to 145% on Chinese goods, though temporary exemptions have been granted for some products like smartphones and electronics. According to UBS, nearly 60% of U.S. imports from China are now subject to the maximum tariff, with the remainder facing increases ranging from 20% to 45% as of last week.
In response, China has retaliated with tariffs of up to 125% on U.S. imports, signaling a further hardening of the trade divide between the two nations. The trade war is weighing on China’s long-term growth prospects, with private-sector economists downgrading their forecasts in light of the escalating tensions. Morgan Stanley has lowered its estimate for China’s 2025 GDP growth from 4.5% to 4.2%.
To support the economy, Beijing has pledged to ramp up stimulus measures, including setting a record budget deficit target for the central government. However, with the trade war showing no signs of easing and the ongoing domestic challenges, the outlook for China’s economic recovery remains uncertain.
