China
Girds for Economic Stress of Trump’s Tariffs
The economy
grew steadily from January through March, but U.S. tariffs pose a risk for
China in the coming weeks and months.
By Keith
Bradsher
Keith
Bradsher, who has covered China’s economy since 2002, reported from Beijing,
Guangzhou and Ganzhou, China.
April 15,
2025
Updated
10:39 p.m. ET
https://www.nytimes.com/2025/04/15/business/china-economy-gdp-q1.html
President
Trump’s tariffs have been good for China’s economic growth. At least they were
over the first three months of the year, as the country’s factories raced to
ship exports ahead of the trade restrictions.
China’s
National Bureau of Statistics reported on Wednesday that the country’s gross
domestic product grew 1.2 percent from the last three months of 2024. If that
pace continues, the Chinese economy will expand at an annual rate of 4.9
percent.
But whether
China can maintain that growth is shrouded in uncertainty.
Pinned down
by tariffs that threaten to freeze trade with its biggest customer, China’s
economy is facing one of its greatest challenges in years.
Growth in
the early months of this year was propelled by rapidly rising exports and the
manufacturing investment and production necessary to support those exports.
Sales of electric cars were also strong thanks to government subsidies for
buyers.
Then on
April 2, Mr. Trump started escalating tariffs, which reached an extraordinary
145 percent for more than half of China’s exports to the United States.
Mr. Trump’s
first two rounds of tariffs on Chinese goods, 10 percent in February and again
in March, had little immediate effect on exports. China’s overall exports in
March rose 12.4 percent in dollar terms from a year earlier, as some exporters
appeared to rush shipments to docks before tariffs could go even higher.
But the
tariff increases this month are likely to have a substantial effect on China’s
exports going forward. Mr. Trump also placed, and a week later paused, heavy
import taxes on Vietnam, Cambodia and other countries that assemble Chinese
components for shipment to the United States. Those countries still face a 10
percent base-line tariff that applies to nearly all U.S. trading partners.
Some
factories in southern China have already suspended operations since the start
of April as American tariffs have reached prohibitive levels. That has raised
concerns about whether unemployment may rise.
Chinese
officials and economists agree that the best way to strengthen the economy
would be to increase domestic consumer spending. That would make the economy
less dependent on foreign markets. Many countries, and not just the United
States, are becoming concerned about China’s tsunami of exports from recently
built factories and are raising tariffs in response.
China’s
leaders have vowed to take big steps to bolster consumers. They have adopted
some measures, notably by providing subsidies for households to buy
manufactured products ranging from rice cookers to electric cars.
China’s
National Bureau of Statistics said the country’s economic output in the first
three months of this year was 5.4 percent higher than it was a year earlier.
Manufacturing
investment grew 9.1 percent in the first quarter compared to the same period
last year, as companies continued to pour money into factories. Infrastructure
investment was up 5.8 percent while real estate investment continued its long
slide, tumbling 9.9 percent.
Many
economists expect more policies to be adopted to offset the effects of the
tariff war.
“The tariffs
are going to cause a headwind for economic growth, but the policymakers are
going to find a way to make up for this export setback,” said Zhu Ning, deputy
dean at the Shanghai Advanced Institute of Finance.
China’s
central bank has allowed the country’s currency, the renminbi, to decline very
slowly against the dollar. It has weakened about 1 percent since mid-March, but
is still little different from where it was a week before Mr. Trump took office
in January.
A weaker
currency could make China’s exports more competitive in foreign markets by
reducing their relative cost. But any gradual decline is likely to be too small
to make a difference against tariffs that have raised the cost of trade by more
than 100 percent. And a sharp devaluation could trigger financial instability
by prompting Chinese households to pull their money out of banks and try to
send it overseas.
China’s
consumers are wary of spending more. Much of the middle class and the affluent
have lost money in the country’s housing market crash. Apartment prices have
fallen as much as 40 percent since 2021 — an erasure of wealth that exceeds the
American housing market crisis nearly two decades ago. Chinese families
typically put up to 80 percent of their savings in real estate, for lack of
other ways to build wealth. The country’s stock market is small and
speculative, while the bond market is mainly for institutional investors.
Frugality
now characterizes almost every spending decision by Chinese families, even
grocery purchases.
“People are
reluctant to spend, so fewer people purchase pork,” Xie Zhengrong, a butcher,
said as he sat on a stool in a covered market in Ganzhou, a town in
south-central China. Some customers used to buy a couple of pounds of pork at a
time, but now buy as little as a quarter of a pound, he said.
Construction
and other real estate activity had represented as much as a quarter of China’s
economic output before the housing meltdown, but has stalled as demand for new
apartments has dried up.
Yu
Hongqiang, a construction worker who migrated from the country’s interior for
jobs in Guangzhou, the commercial hub of southeastern China, said the tariffs
did not affect him directly because all the steel in his industry came from
Chinese mills. But he was still worried.
“We have
concerns, but there is nothing we can do,” he said. “At worst, if there’s no
work, I will just go home.”
Li You
contributed research.
Keith
Bradsher is the Beijing bureau chief for The Times. He previously served as
bureau chief in Shanghai, Hong Kong and Detroit and as a Washington
correspondent. He has lived and reported in mainland China through the
pandemic.
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