China’s Economic Growth Slows Amid Tariff Tensions Despite Strong Q1

China’s industrial output and retail sales growth slowed in April, reflecting mounting pressure from ongoing trade tensions with the United States. Industrial production rose 6.1% year-on-year, outperforming market forecasts of 5.5% but down from March’s 7.7% increase. Retail sales expanded by 5.1%, also falling short of the expected 5.5% and slowing from 5.9% in the previous month.

Fixed asset investment rose 4.0% in the first four months of 2025, slightly below analysts’ forecasts of 4.2%. Despite this, China’s economy grew 5.4% in Q1, surpassing expectations and bolstering confidence in the government’s full-year growth target of around 5%.

The slowdown comes as China grapples with the fallout from escalating tariffs. While Beijing and Washington recently agreed to a 90-day tariff truce, U.S. duties of up to 30% remain in place, leaving uncertainty hanging over China’s export-driven sectors. Factories reliant on U.S. demand have begun reducing operations, contributing to broader signs of stress in the economy.

Nevertheless, China’s nationwide jobless rate edged down to 5.1% from 5.2% in March, and the government continues to support consumption through measures like trade-in subsidies and local spending vouchers.

To cushion the impact of trade friction, authorities rolled out stimulus policies this month, including interest rate cuts and liquidity injections. These were announced just before a breakthrough in Geneva led to the easing of tensions.

Economists at Goldman Sachs suggest that July’s Politburo meeting may bring further policy support if growth continues to face external headwinds. With inflationary risks subdued and lending weakening, pressure is mounting on Beijing to sustain momentum amid global uncertainty.