China's economy experienced a 5.4% annual growth rate in the first quarter, according to the government's announcement on Wednesday, driven by robust exports preceding U.S. President Donald Trump's substantial tariff hikes on Chinese goods.

Because of the trade war making the future unclear, experts predict that the world's second biggest economy will slow down a lot in the next few months. This is happening as high taxes, up to 145%, are put on goods from the US coming into China. China has also put taxes of 125% on goods from the US going to China. At the same time, China says it wants to keep its markets open for trade and investment.

Chinese leader Xi Jinping is visiting several Asian nations this week, advocating for free trade and portraying China as a source of "stability and certainty" in turbulent times.

While Xi toured Vietnam, Malaysia, and Cambodia, the United States declared that a high-ranking State Department representative, Sean O'Neill, was scheduled to journey this week to Hanoi and Ho Chi Minh City in Vietnam, Siem Reap in Cambodia, and Tokyo.

China has also underscored its emphasis on commerce with nations other than the United States at numerous trade exhibitions, which serve to illustrate its enormous market and its formidable competitiveness as a manufacturing behemoth.

Exports played a significant role in enabling China's economy to grow at an annual rate of 5% in 2024, and the official target for this year is approximately 5%.

Sheng Laiyun, a spokesperson for the National Bureau of Statistics, said that in the short term, the tariffs will make things difficult for China's economy, but they will not stop growth in the long run. He also mentioned that China's exports to the United States are now less than 15% of all exports, which is down from over 19% five years ago.

"China's economic underpinnings remain robust and possess considerable potential. We are confident in our capacity to navigate external challenges and attain our predetermined development objectives," Sheng stated.

Examining the economy on a quarterly basis, growth registered 1.2% during the January to March period, representing a decrease from the 1.6% expansion seen in the final quarter of 2024.

Chinese exports saw a significant rise, increasing over 12% year-on-year in March and almost 6% in the first quarter when measured in U.S. dollars, as businesses hastened to precede the implementation of Trump's tariffs, a factor that has underpinned strong manufacturing activity over recent months.

A significant portion of this surge occurred early on, driven by a rush of proactive measures anticipating increased US tariffs and a significant build-up of inventory in the United States as importers hastened to stay ahead of developments, according to Stephen Innes of SPI Asset Management in his commentary.

Industrial production saw a 6.5% increase compared to the previous year in the last quarter, primarily driven by a nearly 11% surge in the production of equipment.

Advanced technologies, such as battery electric and hybrid vehicle manufacturing, experienced the most significant expansion, with a year-on-year increase of 45.4%; simultaneously, production of 3D printers escalated by nearly 45% and industrial robots by 26%.

Notwithstanding its comparatively swift expansion on the world stage, the Chinese economy has faced significant challenges in re-establishing its dynamism since the COVID-19 pandemic, primarily due to a downturn in the real estate sector which has exacerbated unemployment, making households cautious about their expenditure.

Consumer prices went down by 0.1% in the first three months of the year, which suggests that demand is not as strong as the supply in many industries. Also, investment in real estate stayed low, dropping by almost 10% compared to the previous year, even though the government tried to encourage more loans for buying homes.

The coming tariffs crisis is a big problem for Beijing, which is trying to get companies to invest and hire more people, and also trying to get Chinese people to spend more money.

Economists, both in the private and public sectors, have maintained a cautious outlook, largely due to Trump's inconsistent positions regarding the specifics of his trade war.

Because of what has happened in the last two weeks, it is very hard to guess how the taxes the U.S. and China put on each other's goods might change, according to a report by Tao Wang and other economists at UBS.

The International Monetary Fund and Asian Development Bank have maintained more positive projections of approximately 4.6% growth this year.

Upon assuming office, Trump initially imposed a 10% tariff increase on imports from China, subsequently escalating it to 20%. Currently, a significant portion of China's exports to the United States is subject to tariffs as high as 145%.

UBS thinks that if the tariffs stay mostly the same, China's exports to the United States might drop by about two-thirds soon. Also, its total exports around the world could go down by 10% in dollar value. Because of this, UBS lowered its guess for economic growth this year to 3.4% from 4%. It also thinks growth will slow down to 3% in 2026.

Over the past seven months, China has intensified its efforts to stimulate increased consumer spending and private sector investment, significantly increasing subsidies for vehicle and appliance trade-ins and allocating more capital to the housing sector and other industries facing financial difficulties.