According to a government announcement on Wednesday, China's economy grew by 5.4% year-on-year in the first quarter, driven by robust exports prior to President Trump's accelerated implementation of tariffs on Chinese goods.

Because of the trade war, experts predict that China's economy, the second largest in the world, will slow down a lot in the next few months. This is happening as new taxes, some as high as 145%, are put on goods imported into the U.S. from China. China has responded by putting taxes of up to 125% on goods exported from the U.S. However, China also says it wants to keep its markets open for trade and investment.

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

At the same time that Xi was visiting Vietnam, Malaysia, and Cambodia, the U.S. said that a senior official from the State Department, Sean O'Neill, would travel that week to Hanoi and Ho Chi Minh City in Vietnam, to Siem Reap in Cambodia, and to Tokyo.

China has also been emphasising its commitment to trade with nations beyond the United States at various trade exhibitions, which are underscoring its significant market size and competitive edge as a manufacturing powerhouse.

Driven by exports, China's economy achieved a 5% annual growth rate in 2024, aligning with this year's official objective of approximately 5%.

The spokesperson for the National Bureau of Statistics, Sheng Laiyun, informed reporters that while the tariffs would exert pressure on the Chinese economy in the short term, they would not impede long-term expansion. He further pointed out that China's exports to the United States now constitute less than 15% of its total exports, a decrease from over 19% five years prior.

China possesses a stable and resilient economic base with significant potential. We are confident and capable of navigating external challenges and attaining our pre-determined development objectives," Sheng affirmed.

On a quarterly basis, the economy expanded by 1.2% from January to March, a deceleration compared to the 1.6% growth observed in the final quarter of 2024.

Chinese exports went up a lot, increasing over 12% compared to the previous year in March and almost 6% in U.S. dollars in the first three months of the year. This happened because companies hurried to send goods before Trump's new taxes on imports started. This rush has helped keep factories very busy in the last few months.

A lot of this happened at the beginning, caused by a quick increase in activity before the U.S. tariffs went up. Importers in the U.S. also built up a lot of stock quickly to try and get ahead, according to Stephen Innes of SPI Asset Management in a commentary.

Industrial output grew by 6.5% year-on-year in the most recent quarter, with a significant contribution from an almost 11% rise in equipment manufacturing production.

Notably, there was substantial expansion in advanced technology sectors; for instance, the production of battery electric and hybrid vehicles saw a remarkable increase of 45.4% compared to the previous year, while the output of 3D printers climbed by nearly 45% and industrial robot production surged by 26%.

Although the Chinese economy grew quite fast compared to other countries, it has been hard for it to get back to its previous strength since the COVID-19 pandemic started. A big drop in the property market has led to more people losing their jobs, which makes families careful about spending money.

Consumer prices experienced a marginal decline of 0.1% in the initial quarter, indicating a potential imbalance where demand lags behind supply across numerous sectors. Concurrently, real estate investment remained subdued, registering a nearly 10% decrease year-on-year, notwithstanding governmental initiatives aimed at stimulating increased lending for residential acquisitions.

As Beijing endeavors to stimulate business investment, job creation, and consumer spending, the impending tariff crisis poses a significant new challenge.

Economists in both the private and public sectors have maintained a cautious outlook, considering Trump's frequent alterations to his position on the specifics of his trade dispute.

Given the developments over the past fortnight, it is exceedingly challenging to forecast how reciprocal U.S. and Chinese tariffs may unfold, Tao Wang and other UBS economists stated in a report.

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

When Trump became president, he first increased tariffs on imports from China by 10%. Later, he increased them to 20%. Now, most things China exports to the United States have a 145% tariff.

UBS projects that, assuming the tariffs largely stay at their current level, China's exports to the United States might decrease by two-thirds in the near future, and its overall global exports could decline by 10% in monetary terms. Consequently, it has reduced its economic growth forecast for this year from a prior 4% to 3.4%. Furthermore, it anticipates growth diminishing to 3% by 2026.

Over the past seven months, China has intensified its endeavors to stimulate consumer spending and private sector investment, substantially increasing subsidies for vehicle and appliance trade-ins and directing additional funds towards housing and other struggling sectors.