China Q1 GDP growth beats expectations, but US tariff shock looms large
China’s economy grew by 5.4% year-on-year in the first quarter of 2025, surpassing expectations and maintaining the pace from the previous quarter. This growth was driven by strong industrial output, a rebound in retail sales, and government stimulus measures, with March retail sales up 5.9% and industrial production rising 7.7% compared to forecasts. Fixed asset investment increased by 4.2%, although the real estate sector continued to contract sharply, with property investment down 9.9% year-on-year.
Despite this robust start, the outlook for China’s economy is clouded by escalating trade tensions with the United States. The U.S. has imposed tariffs on Chinese imports reaching as high as 145%, prompting retaliatory tariffs from Beijing. These tariffs threaten to severely impact China’s export-driven growth engine, potentially leading to a sharp slowdown in the coming quarters. Analysts and economists warn that the strong Q1 growth was partly front-loaded, fueled by pre-tariff stockpiling and stimulus, and that momentum is expected to weaken as the full impact of the trade war unfolds.
Chinese officials and economists have called for forceful and timely policy responses, including possible interest rate cuts and increased fiscal spending, to counteract the negative effects of the tariff shock and sustain economic growth. The trade conflict has also heightened geopolitical uncertainty and poses risks to the global economic order.
China’s Q1 2025 GDP growth beat expectations at 5.4%, the looming U.S. tariff shock casts a significant shadow over the country’s economic prospects, with challenges in domestic demand, the property sector, and export markets likely to weigh on future growth.
