China’s GDP expanded more than expected in the first quarter, offering a stronger-than-anticipated start to the year, even as markets brace for the economic impact of newly imposed U.S. tariffs

China’s economy expanded at a faster-than-expected pace in the first quarter, supported by strong industrial output and resilient consumer spending, which together drove upbeat early-year performance.

Gross domestic product rose 5.4% year-on-year in Q1, matching the growth rate from the final quarter of 2024 and exceeding forecasts for a 5.2% increase.

Despite the encouraging start, economists remain wary, warning that the latest round of U.S. tariffs — seen as the most serious threat to the world’s second-largest economy — could sharply slow activity in the months ahead. President Donald Trump’s decision to raise tariffs on Chinese imports to 125%, followed by Beijing’s reciprocal measures, has intensified fears of deeper fallout from escalating trade tensions between the two superpowers.

April’s economic data is expected to reflect the early effects of the trade conflict, with a notable loss of growth momentum anticipated. In response, China is likely to introduce additional policy support to cushion the blow, especially as tariffs add pressure to an already struggling property sector.

While recent government stimulus measures have helped lift consumption and investment, analysts believe further steps will be needed to counter mounting risks. China’s $1 trillion trade surplus in 2024 provided a crucial buffer, offsetting weakness in domestic demand and property market woes, helping keep the recovery on course.

However, officials caution that the road ahead will be challenging, with growth forecasts for 2025 lowered to a range of 4.0%–4.5%, down from 5.0% in 2024 and falling short of market expectations for a 5.0% expansion.