President Trump’s tariffs have been good for China’s economic growth. At least they were over the first three months of the year, as the country’s factories raced to ship exports ahead of the trade restrictions.
China’s National Bureau of Statistics reported on Wednesday that the country’s gross domestic product grew 1.2 percent from the last three months of 2024. If that pace continues, the Chinese economy will expand at an annual rate of 4.9 percent.
But whether China can maintain that growth is shrouded in uncertainty.
Pinned down by tariffs that threaten to freeze trade with its biggest customer, China’s economy is facing one of its greatest challenges in years.
Growth in the early months of this year was propelled by rapidly rising exports and the manufacturing investment and production necessary to support those exports. Sales of electric cars were also strong thanks to government subsidies for buyers.
Then on April 2, Mr. Trump started escalating tariffs, which reached an extraordinary 145 percent for more than half of China’s exports to the United States.
Mr. Trump’s first two rounds of tariffs on Chinese goods, 10 percent in February and again in March, had little immediate effect on exports. China’s overall exports in March rose 12.4 percent in dollar terms from a year earlier, as some exporters appeared to rush shipments to docks before tariffs could go even higher.
But the tariff increases this month are likely to have a substantial effect on China’s exports going forward. Mr. Trump also placed, and a week later paused, heavy import taxes on Vietnam, Cambodia and other countries that assemble Chinese components for shipment to the United States. Those countries still face a 10 percent base-line tariff that applies to nearly all U.S. trading partners.
Some factories in southern China have already suspended operations since the start of April as American tariffs have reached prohibitive levels. That has raised concerns about whether unemployment may rise.
Chinese officials and economists agree that the best way to strengthen the economy would be to increase domestic consumer spending. That would make the economy less dependent on foreign markets. Many countries, and not just the United States, are becoming concerned about China’s tsunami of exports from recently built factories and are raising tariffs in response.
China’s leaders have vowed to take big steps to bolster consumers. They have adopted some measures, notably by providing subsidies for households to buy manufactured products ranging from rice cookers to electric cars.
China’s National Bureau of Statistics said the country’s economic output in the first three months of this year was 5.4 percent higher than it was a year earlier.
Manufacturing investment grew 9.1 percent in the first quarter compared to the same period last year, as companies continued to pour money into factories. Infrastructure investment was up 5.8 percent while real estate investment continued its long slide, tumbling 9.9 percent.
Many economists expect more policies to be adopted to offset the effects of the tariff war.
“The tariffs are going to cause a headwind for economic growth, but the policymakers are going to find a way to make up for this export setback,” said Zhu Ning, deputy dean at the Shanghai Advanced Institute of Finance.
China’s central bank has allowed the country’s currency, the renminbi, to decline very slowly against the dollar. It has weakened about 1 percent since mid-March, but is still little different from where it was a week before Mr. Trump took office in January.
A weaker currency could make China’s exports more competitive in foreign markets by reducing their relative cost. But any gradual decline is likely to be too small to make a difference against tariffs that have raised the cost of trade by more than 100 percent. And a sharp devaluation could trigger financial instability by prompting Chinese households to pull their money out of banks and try to send it overseas.
China’s consumers are wary of spending more. Much of the middle class and the affluent have lost money in the country’s housing market crash. Apartment prices have fallen as much as 40 percent since 2021 — an erasure of wealth that exceeds the American housing market crisis nearly two decades ago. Chinese families typically put up to 80 percent of their savings in real estate, for lack of other ways to build wealth. The country’s stock market is small and speculative, while the bond market is mainly for institutional investors.
Frugality now characterizes almost every spending decision by Chinese families, even grocery purchases.
“People are reluctant to spend, so fewer people purchase pork,” Xie Zhengrong, a butcher, said as he sat on a stool in a covered market in Ganzhou, a town in south-central China. Some customers used to buy a couple of pounds of pork at a time, but now buy as little as a quarter of a pound, he said.
Construction and other real estate activity had represented as much as a quarter of China’s economic output before the housing meltdown, but has stalled as demand for new apartments has dried up.
Yu Hongqiang, a construction worker who migrated from the country’s interior for jobs in Guangzhou, the commercial hub of southeastern China, said the tariffs did not affect him directly because all the steel in his industry came from Chinese mills. But he was still worried.
“We have concerns, but there is nothing we can do,” he said. “At worst, if there’s no work, I will just go home.”
Li You contributed research.
