China's economy registered a 5.4% annual growth rate in the first quarter, as reported by the government on Wednesday, driven by robust exports preceding U.S. President Donald Trump's swift implementation of higher tariffs on Chinese goods.

Because of the trade war, experts predict that the world's second largest economy 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 coming from the U.S. to China. China has responded by putting taxes of up to 125% on goods going from the U.S. to China. At the same time, China says it wants to keep its markets open for buying and selling, and for investment.

Chinese leader Xi Jinping is visiting several other Asian nations this week, advocating for free trade and positioning China as a source of "stability and certainty" amidst current global unpredictability.

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 this week to Hanoi and Ho Chi Minh City in Vietnam, to Siem Reap in Cambodia, and to Tokyo.

China has been emphasising its focus on trade with nations beyond the United States at diverse trade fairs, which serve to highlight its extensive market and competitive edge as a manufacturing powerhouse.

Driven by exports, China's economy is projected to achieve a growth rate of approximately 5% in 2024, aligning with the official target set for the year.

According to Sheng Laiyun, spokesperson for the National Bureau of Statistics, while the immediate impact of tariffs will strain China's economy, they are unlikely to impede its long-term growth trajectory, noting a decline in exports to the United States, which now constitute less than 15% of total exports compared to over 19% five years prior.

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

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

Chinese exports saw a significant increase of over 12% in March compared to the previous year, and a rise of nearly 6% in US dollar value during the first quarter, as businesses expedited shipments ahead of anticipated tariffs under the Trump administration. This phenomenon has bolstered vigorous manufacturing activity in recent months.

Stephen Innes of SPI Asset Management commented that a significant portion of this occurred initially, driven by proactive efforts anticipating US tariff increases and a surge in US inventory as importers rushed to stay ahead of developments.

Industrial output surged by 6.5% year-on-year in the final quarter, primarily driven by an increase nearing 11% in the production of equipment.

Growth proved most robust in cutting-edge technologies, particularly in the manufacturing of battery electric and hybrid vehicles, which saw a significant year-on-year increase of 45.4%. Production of 3D printers climbed by nearly 45%, while that of industrial robots surged by 26%.

Although the Chinese economy has grown quite fast compared to other countries, it has found it hard to recover since the COVID-19 pandemic. Problems in the property market have increased joblessness, which has made families hesitant to spend money.

Consumer prices went down by 0.1% in the first three months of the year, which suggests that people are not buying as much as companies are producing in many areas. Also, investment in property stayed low, falling by almost 10% compared to the previous year, even though the government tried to encourage more loans for buying houses.

The impending tariff dispute poses a significant setback as Beijing endeavors to stimulate investment and employment, while also encouraging increased consumer spending.

Economists across both the private and public sectors have maintained a reserved outlook, largely owing to the unpredictability of Trump's shifting positions on the specifics of his trade conflict.

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

The International Monetary Fund and Asian Development Bank have maintained their more optimistic predictions of approximately 4.6% growth for the current year.

Upon assuming office, Trump initially mandated a 10% tariff hike on Chinese imports, subsequently escalating this to 20%, and currently, China confronts a 145% tariff on the majority of its exports to the United States.

UBS projects that, should the tariffs persist at their current levels, China's exports to the United States could decline by two-thirds in the near future, potentially leading to a 10% reduction in the dollar value of its global exports. Consequently, UBS has revised down its economic growth forecast for the current year to 3.4% from a prior estimate of 4%, and anticipates a further deceleration to 3% in 2026.

Over the past seven months, China has intensified its endeavours to stimulate greater consumer expenditure and private sector investment, significantly increasing subsidies for exchanging older vehicles and appliances and allocating additional capital towards housing and other financially constrained sectors.