China's economy grew by 5.4% year-on-year in the first quarter, buoyed by robust export performance before the sharp escalation of U.S. tariffs under President Donald Trump.

Amidst the uncertainty generated by the trade conflict, analysts predict a marked deceleration in the world's second-largest economy over the ensuing months, particularly as considerable tariffs, reaching 145%, are imposed on American imports from China. Beijing has retaliated with tariffs of up to 125% on American exports, while simultaneously asserting its commitment to maintaining open markets for trade and investment.

Chinese leader Xi Jinping is undertaking visits to several other Asian countries this week, advocating for free trade and portraying China as a provider of "stability and certainty" amidst prevailing uncertainties.

Coinciding with Xi's visits to Vietnam, Malaysia, and Cambodia, the U.S. declared a senior 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 to Tokyo.

China has also been emphasizing its dedication to trade with nations other than the United States at numerous trade exhibitions that are demonstrating its extensive market and competitive edge as a manufacturing powerhouse.

Exports were instrumental in propelling China's economy to achieve an annual expansion rate of 5% in 2024, aligning with this year's official target of approximately 5%.

Sheng Laiyun, a spokesperson for the National Bureau of Statistics, informed reporters that while the tariffs would exert immediate pressure on China's economy, they were not expected to impede long-term growth, adding that China's exports to the United States had decreased from over 19% of total exports five years ago to under 15%.

China's economic underpinnings are robust, adaptable, and hold substantial potential. We possess the necessary assurance, capacity, and conviction to navigate external obstacles and attain our predetermined development objectives," Sheng affirmed.

During the first quarter, spanning January through March, the economy experienced a 1.2% growth, a deceleration from the 1.6% expansion observed in the final quarter of 2024.

In March, Chinese exports experienced a notable surge exceeding 12% compared to the previous year, and nearly 6% in US dollar value across the first quarter, as companies strategically accelerated shipments to circumvent anticipated tariffs imposed by Trump. This proactive measure has contributed to sustained vigorous manufacturing growth over recent months.

A lot of this happened early on, caused by quick actions taken before the U.S. raised tariffs and a large increase in goods in the United States as importers tried to avoid problems later, Stephen Innes of SPI Asset Management wrote in a comment.

Industrial output saw a 6.5% increase compared to the previous year in the final quarter, primarily driven by an almost 11% surge in equipment manufacturing production.

Significant expansion was noted in sophisticated technologies, particularly in the manufacturing of battery electric and hybrid vehicles, which saw a substantial increase of 45.4% compared to the previous year; output for 3D printers similarly rose by nearly 45%, and industrial robots experienced a strong surge of 26%.

Even though it has grown quite quickly compared to other countries, the Chinese economy has had trouble getting back on track since the COVID-19 pandemic. This is because problems in the housing market have increased job losses, making families careful about spending money.

In the first quarter, consumer prices experienced a 0.1% decline, indicating a potential disparity between demand and supply across numerous industries. Furthermore, real estate investment showed persistent weakness, dropping by almost 10% compared to the previous year, despite governmental initiatives aimed at stimulating increased lending for property acquisition.

As Beijing endeavours to stimulate corporate investment and employment, and encourage greater consumer spending, the impending tariff crisis presents another significant challenge.

Economists in both the private and public sectors have remained cautious, given how Trump has frequently altered his stance on 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 have put on each other's goods might change, according to a report from Tao Wang and other economists at UBS.

The International Monetary Fund and Asian Development Bank maintain more sanguine forecasts, anticipating growth of approximately 4.6% this year.

Upon assuming office, Trump initially mandated a 10% tariff increase on imports from China, subsequently escalating it to 20%; currently, China confronts tariffs of 145% on the majority of its exports to the United States.

UBS projects that, should the current tariff situation persist, Chinese exports to the US might decline by two-thirds in the near future, and global exports could decrease by 10% in value. Consequently, the firm has revised its economic growth forecast for this year downwards to 3.4% from an initial 4%, anticipating a further deceleration to 3% by 2026.

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