'Frontloading' might have helped, but need to brace for tariff-induced woes: Analysts on China's surprise Q1 growth

Beijing's gung-ho rhetoric belies deep concerns about the impact that Trump's tariffs could have on the deeply export-dependent Chinese economy

By AFP

Published: Apr 17, 2025 11:47:12 AM IST

Chinese made cars, including Volvo and other brands, are seen at the port in Nanjing, in China’s eastern Jiangsu province on April 16, 2025, as they wait to be loaded onto ships for export. Image: AFP

Forecast-beating growth in China's first quarter may have offered Beijing's economic planners some much needed good news—but analysts warn they should strap in for tariff-induced woes further down the line.

The National Bureau of Statistics said Wednesday the world's number-two economy expanded 5.4 percent on-year in January-March, helped by a surge in exports.

However, observers said the bulk of that came from "frontloading" as business rushed to ship goods out of the factory before Donald Trump's trade blitz kicked in.

And while state efforts to boost lagging consumption—for months a drag on growth—played a role in the growth boost, the outlook remained uncertain.

"It's too early to interpret this strength as a sign of lasting market recovery," Yue Su at the Economist Intelligence Unit told AFP.

"The strong performance has been driven by trade frontloading ahead of anticipated tariffs and a policy-driven rebound in consumption—particularly in electronics and home appliances," she added.

Tit-for-tat exchanges have seen US levies imposed on China rise to 145 percent, and Beijing setting a retaliatory 125 percent toll on imports from America.

Trump has said the ball is in China's court if it wants to find a way out and Beijing has, in turn, vowed to "fight to the end" in a trade war that shows few signs of letting up.

But Beijing's gung-ho rhetoric belies deep concerns about the impact that Trump's tariffs could have on the deeply export-dependent Chinese economy.

"The escalation happening in April is going to be felt in the second-quarter figures as the tariffs will send stateside firms looking to other suppliers, impeding Chinese exports and slamming the brakes on investment," Heron Lim, an economist at Moody's Analytics, told AFP.

"This will hit electronics makers and exporters the hardest, as their products dominate China's US-bound exports," he said.

And Louise Loo at Oxford Economics warned that "the improvement in growth momentum is very likely to be short-circuited in the coming months by the incoming headwinds of punitive tariffs".

Also read: China's economy beats forecasts in first-quarter before Trump tariffs bite

More macro please

China on Wednesday admitted that the global economy was becoming more "complex and severe"—and that tariffs were putting "pressure" on trade.

A top economic planner also stressed that more "proactive and effective macro policies" would be needed to boost growth.

Beijing last year announced a string of aggressive measures to reignite the economy, including interest rate cuts, cancelling restrictions on homebuying, hiking the debt ceiling for local governments and bolstering support for financial markets.

After a blistering market rally fuelled by hopes for a long-awaited "bazooka stimulus", optimism waned as authorities refrained from providing a specific figure for the bailout or fleshing out any of the pledges.

But as a potentially crippling trade war looms, analysts agree that Beijing may finally feel pressed to do more to boost domestic spending and tariff-proof the economy.

A debt crisis in the property sector—long a major drag on broader consumer sentiment—remains a crucial handicap for the economy.

"Throwing the domestic economy a lifeline is more important than ever before," Sarah Tan of Moody's Analytics said.

"The cratering property market remains front and centre of households' concerns," she added.

"Combined with the shaky labour market, falling house prices are giving households good reason to prioritise saving over spending."

Insights into how that stimulus could work could emerge from an expected meeting of China's Politburo, its ruling party Communist Party's top decision-making body.

"We continue to anticipate a $2 trillion stimulus package focused on consumption, infrastructure, urban renewal, and shantytown renovation," said Su at the Economist Intelligence Unit.

"Challenges to China's economy remain significant over the coming quarters."