China's economy expanded by a better-than-expected 5.4% in the first quarter, maintaining a strong momentum despite U.S. tariff threats.

China's economy has shown unexpected resilience in the face of formidable external pressures, particularly from the escalating trade war with the United States. In the January-March quarter of 2025, the National Bureau of Statistics reported a GDP growth of 5.4%, exceeding analysts’ expectations and marking a substantial recovery from prior economic stagnation. This upbeat outlook can largely be attributed to strategic policy stimulus efforts implemented by the Chinese government in late 2024. Key sectors of the economy, like industrial output and retail sales, also posted impressive growth figures, suggesting that domestic consumption has begun to regain traction. Notably, industrial output rose by 6.5%, while retail sales increased by 5.9% year-on-year in March. However, this optimistic data comes with significant caveats. Analysts caution that the benefits of this growth are heavily reliant on a temporary export surge as manufacturers rushed to ship goods ahead of looming U.S. tariffs—set to rise to unprecedented levels. Established tariffs on Chinese goods have now reached as high as 145%, with retaliatory measures causing China to impose 125% tariffs on U.S. imports. Given these circumstances, many experts warn of a sharp decline in export growth in the coming months as these tariffs take full effect. Investment banks are already downgrading their growth forecasts, with some projecting a decline to just 3.4% for the year as these tariff-induced pressures mount. The Chinese government is expected to respond with additional monetary and fiscal measures aimed at stimulating the economy and promoting domestic consumption. This includes potential interest rate cuts and stimulus packages to offset the impacts of the trade war. In conclusion, while the first quarter's results indicate a strong start for the Chinese economy, the challenging landscape of international trade relations, particularly with the United States, could hinder sustained growth. Policymakers face an uphill battle as they work to stabilize the economy in the face of escalating protectionism and dwindling external demand, signaling the complexity of the global economic environment as 2025 unfolds.