China Export Surge Swamp Tariffs
China ended HI 2025 with a record trade surplus of about US$586 billion after exports to the US began to stabilise, with factories riding out the tariff rollercoaster that upended global commerce.
China's Foreign Trade Demonstrates Resilience Amid Persistent Tariff Headwinds in HI 2025
By Dr. Digby James Wren
China concluded the first half of 2025 with a record trade surplus of approximately US$586 billion, signalling a notable stabilisation in its export performance despite enduring significant global trade turbulence driven primarily by US tariff policies. This robust outcome underscores the complex dynamics shaping international commerce and China's adaptive strategies.
Record Performance and Stabilising Trends
According to data released by the General Administration of Customs (GAC) on July 15th, 2025, China's total goods imports and exports reached US$3.04 trillion (21.79 trillion yuan) in the January-June period, marking a year-on-year increase of 2.9%. A significant acceleration was observed in the second quarter, with foreign trade growth rising 4.5% year-on-year, 3.2 percentage points higher than the first quarter. This represents the ninth consecutive quarter where quarterly foreign trade value exceeded 10 trillion yuan.
Exports emerged as the primary driver, rising 7.2% year-on-year to 13 trillion yuan. Conversely, imports declined by 2.7% to 8.79 trillion yuan, contributing substantially to the record surplus. Monthly data for June provided further evidence of positive momentum: exports surged 5.8% year-on-year to $325 billion, exceeding analyst expectations. Imports also returned to positive territory, growing 1.1% year-on-year – the first increase since February.
Navigating US Tariffs
The relationship with the United States remained a critical, albeit challenging, component of China's trade picture. Exports to the US fell 9.9% year-on-year in yuan terms during the first half. While shipments to the US dropped 16.1% year-on-year in June, this represented a significant moderation from the steep 34.5% decline witnessed in May. This improvement followed the conclusion of a US-China trade agreement at the end of June, building on a May decision in Geneva to mutually reduce tariffs.
"The pick-up in headline export growth mainly reflected the rebound of US-bound exports in June, likely due to the substantial tariff reduction following the US-China trade talks in Geneva in May." (Goldman Sachs economist Andrew Tilton)
Consequently, US tariffs on Chinese goods were reduced to around 55% from highs exceeding 145% in early April. However, Chinese goods still faced an additional 30% US tariff layer implemented earlier in 2025.
Diversification as a Core Strategy
Faced with persistent pressure from US tariffs, Chinese exporters demonstrated considerable agility by accelerating market diversification. This strategic pivot was a key factor underpinning the overall resilience. Exports to the Association of Southeast Asian Nations (ASEAN), a bloc of ten nations, soared 17% year-on-year in June and rose 9.6% for the first half, reaching 3.67 trillion yuan. Trade with Belt and Road Initiative (BRI) partner countries grew 4.7% to 11.29 trillion yuan, now constituting 51.8% of China's total foreign trade – an increase of 0.9 percentage points. Increased trade with Africa, Latin America, the EU, South Korea, and Japan also contributed significantly. GAC Deputy Head Wang Lingjun highlighted this trend: "During the January-June period, China's foreign trade with over 190 countries and regions has increased, and trade with 61 trading partners exceeded 50 billion yuan, five more than the same period last year... China's trading partners became more diverse."
Resilience and Structural Shifts
Analysts and officials pointed to multiple factors behind China's trade resilience. Professor Cong Yi of the Tianjin School of Administration stated, "The foreign trade data for the first half of the year are generally in line with market expectations and it clearly manifests the resilience of China's foreign trade... It shows that the impact of the short-term factors such as the US tariffs is fading, and with the dual support of Chinese government's effective policies and China's strong industrial fundamentals, foreign trade has shown a positive trend of recovery." He further elaborated: "The resilience of China's foreign trade stems from multiple dimensions. On one hand, China has persisted in expanding opening-up and responded proactively to changes in the external environment. On the other hand, as the world's largest manufacturing country, China's production capacity and product competitiveness lead globally, providing a solid basis for export resilience."
Structural shifts within exports were evident. Exports of electromechanical products, a crucial category, increased by 9.5% year-on-year, accounting for 60% of total exports, indicating strengthened growth drivers. Furthermore, the base of foreign trade enterprises expanded robustly, with approximately 628,000 firms engaged in imports and exports in the first half – surpassing 600,000 for the first time and representing an increase of about 43,000 firms compared to the same period last year.
Deputy Head Wang Lingjun contextualized the challenges and strengths: "Currently, certain countries violate international trade norms by imposing unreasonable tariffs, causing severe challenges to global economic development. However, an increasingly diversified foreign trade market, innovative and high-quality products manufactured in China, and the adaptive foreign trade entities give China the confidence and ability to cope with global challenges."
On the import side, driven by domestic policies like equipment upgrade and consumer trade-in programs, imports returned to positive growth in Q2. Wang noted double-digit import growth for petrochemical, textile, and other machinery and equipment, rapid growth for key parts like electronic components, and increased volumes for vital raw materials such as crude oil and metal ore.
Challenges and Policy Responses
Despite the positive HI performance, significant challenges persist on the horizon. The US administration continues to evolve its trade strategy, posing mounting risks. A pivotal development is the new agreement with Vietnam, imposing a 20% tariff on Vietnamese exports to the US and a punitive 40% duty on goods deemed to be transshipped from China. This directly targets a long-used workaround by Chinese exporters and threatens to curb demand for both finished Chinese goods bound for the US and components used in supply chains across third countries.
Furthermore, the US announced a raft of new levies effective August 1st, including a specific 50% tariff on copper imports, adding to existing duties on products like cars, aluminium, and steel. The US administration has also signalled that more sectoral levies are in the pipeline. President Trump's planned imposition of broader "reciprocal" tariffs on August 1st adds another layer of uncertainty. These measures will test the durability of China's export recovery and diversification efforts.
Professor Cong Yi expressed cautious optimism for the latter half of 2025: "In the second half of the year, it is expected that exports will likely maintain growth, driven by broader opening-up policies, improved corporate competitiveness, and expanded market diversification. Imports will benefit from domestic demand expansion policies." However, the evolving external environment, characterized by rising unilateralism and protectionism as noted by Wang Lingjun, ensures that navigating global trade headwinds will remain a critical task for China's economy, particularly as it seeks trade growth to counterbalance domestic challenges like weak demand linked to the property sector. The efficacy of China's diversification and domestic policy support will be crucial determinants of its continued trade resilience amidst these persistent and emerging pressures.
China’s Economy in May 2025: Cooling Industrial Output, Resilient Consumption
China’s May 2025 economy data highlight resilient domestic consumption and strategic trade diversification as key stabilizers amid a slowing industrial sector, underscoring how the economy is adapting to external pressures with cautious optimism. Despite manufacturing headwinds and persistent deflationary trends, steady service growth and rising retail sales highlight a fragile yet hopeful recovery.
China’s economic performance in May 2025 confirmed a mixed pattern: factory growth slowed, yet household-driven consumption showed unexpected strength, offering a fragile offset amid ongoing trade pressures.
In many ways, the data released by the country’s National Bureau of Statistics (NBS) reflect the dual-speed nature of the recovery, where manufacturing momentum is cooling, consumers are cautiously stepping back into the spotlight.
This contrast is especially relevant against the backdrop of intensifying external pressures, particularly from the US tariff regime, which weighed heavily on China’s export performance to key markets. Still, authorities have leaned on domestic demand to stabilize growth, deploying a combination of fiscal nudges and retail-friendly incentives that seem to be gaining some traction.
Meanwhile, the labor market showed modest improvement, including a notable dip in youth unemployment, though it remains high. Deflationary pressures persisted, with price indicators still reflecting weak overall demand and subdued business confidence. All this points to an economy that is neither overheating nor collapsing, but rather one in delicate balance, requiring careful policy calibration as the year unfolds.
In this article, we break down the latest economic and trade data and assess the broader policy backdrop shaping China’s growth trajectory in 2025.
Key economic indicators – May 2025
Foreign trade: RMB 3.81 trillion total trade, up +2.7% year-over-year (YoY), with exports reaching RMB 2.28 trillion, growing +6.3% YoY; and imports falling to RMB 1.53 trillion, declining –2.1% YoY.
Industrial added value: +5.8% YoY, the slowest since November 2024 and down from +6.1% in April
Service industry production index: +6.2%, slightly higher than the first-quarter pace and supported by booming digital and transport services
Retail sales of consumer goods: RMB 4.13 trillion (US$574.94 billion), +6.4% YoY, the strongest increase since December 2023
Fixed asset investment (Jan–May): RMB 19.19 trillion (US$2.67 trillion), +3.7% YoY. Excluding real estate, investment rose +7.7%; manufacturing investment surged +8.5%, while real estate dropped –10.7%.
Urban surveyed unemployment rate: eased to 5.0%, down 0.1% from April
Consumer price index (CPI): –0.1% YoY; the core CPI, excluding food and energy, rose +0.6%.
These May figures show trade and investment cooling, while robust retail sales and stable service-sector growth, highlighting a shift toward domestic demand as the engine of China’s economy.
China’s trade dynamics in May
China’s foreign trade performance in May 2025 presented a nuanced picture, characterized by a modest increase in exports coupled with a notable decline in imports.
In May 2025, China’s total imports and exports of goods reached RMB 3,809.8 billion, marking a 2.7 percent increase year-on-year. Specifically, exports were RMB 2,276.7 billion, up by 6.3 percent year-on-year, while imports totaled RMB 1,533.1 billion, a decrease of 2.1 percent year-on-year.
In dollar terms, exports recorded a year-on-year increase of 1.5 percent, reaching US$283.5 billion. Conversely, imports experienced a significant contraction, falling by 5.6 percent year-on-year to US$211.15 billion. This divergence resulted in a substantial trade surplus of US$72.35 billion for the month.
For the first five months of 2025 (January to May), China’s total imports and exports of goods amounted to RMB 17,944.9 billion, an increase of 2.5 percent year-on-year. Exports for this period climbed to RMB 10,668.2 billion, up by 7.2 percent, while imports declined by 3.8 percent to RMB 7,276.7 billion.
The modest export growth in dollar terms, alongside a considerable contraction in imports, illustrates an uneven trade performance. The large trade surplus, while seemingly positive, can be interpreted as a double-edged sword; it may reflect not only robust export competitiveness but also underlying weakness in domestic demand.
An examination of China’s trade performance with its major partners reveals significant shifts, indicative of ongoing diversification efforts and the direct impact of geopolitical dynamics.
China’s Trade with Key Partners (May 2025 vs. May 2024)
PartnerYoY % Change (Exports)YoY % Change (Imports)United States-8.5%-12.1%European Union3.2%-2.8%ASEAN10.5%7.1%
US Tariffs impact on China’s trade in May 2025
The impact of US tariffs on China’s trade in May 2025 is multifaceted, extending beyond direct bilateral trade figures to influence China’s broader trade strategy and global supply chain dynamics.
US tariffs significantly impacted China’s trade in May 2025, with a recent study estimating a 15-20 percent reduction in exports to the US for targeted goods. This directly correlates with the overall 8.5 percent year-on-year decline in China’s exports to the US, indicating a concentrated burden on specific sectors that are compelled to absorb costs, find new markets, or scale back production.
While these tariffs have imposed direct costs and forced market re-routing, China’s overall trade resilience has been maintained through strategic diversification. The decline in US trade has been partially offset by growth in other markets, suggesting that tariffs have not crippled China’s export machine entirely but have forced a significant reorientation of its trade flows.
The evolving dynamics of China’s trade relationships reveal a multi-faceted strategy aimed at enhancing its supply chain resilience and mitigating geopolitical vulnerabilities.
On the export front, there is direct evidence of China’s success in re-routing trade away from the US. This is particularly visible in the increased exports to the EU, which rose by 3.2 percent year-on-year, and especially to ASEAN, which surged by 10.5 percent year-on-year. This strategic diversification highlights the adaptability of Chinese exporters and underscores the growing importance of non-Western markets in China’s evolving trade landscape. It serves as a key mitigation strategy to offset potential disruptions or declines in trade with the United States.
Concurrently, and significantly influenced by external pressures, particularly the US’s semiconductor bans and broader export controls, there’s a significant 12.1 percent year-on-year decline in imports from the US and a 15 percent year-on-year decline in semiconductor imports. This strongly suggests a deliberate and accelerated shift in China’s import patterns. This indicates China’s intensified efforts to reduce reliance on US suppliers for critical goods and components. This reduction is being achieved either through diversified sourcing from other countries (complementing its export diversification efforts) or, crucially, through accelerated domestic production, as part of a broader, proactive strategy to enhance its own supply chain resilience and reduce vulnerability to geopolitical pressures.
China’s key economic indicators in May 2025
Industrial momentum eases in May despite resilient high-tech output
China’s industrial sector maintained a stable expansion in May 2025, though signs of cooling momentum are beginning to emerge. Official figures show that the value-added industrial output of large-scale enterprises rose 5.8 percent year-on-year, slightly below April’s 6.1 percent and the slowest growth rate since November 2024. On a month-on-month basis, industrial output increased by 0.61 percent.
Among the three major industrial categories, manufacturing maintained the strongest pace with a 6.2 percent year-on-year increase, followed by mining at 5.7 percent and utilities (including electricity, heat, gas, and water production and supply) at 2.2 percent. While these figures suggest continued expansion, the pace of growth has softened, reflecting broader headwinds ranging from property sector instability to global demand uncertainties.
Nonetheless, innovation-driven segments remained key engines of growth. Equipment manufacturing expanded 9.0 percent year-on-year, while high-tech manufacturing grew by 8.6 percent, outpacing overall industrial output by 3.2 and 2.8 percentage points, respectively. These sectors were further buoyed by strong production figures in emerging technologies:
3D printing equipment: up 40 percent year-on-year;
Industrial robots: rising 35.5 percent year-on-year; and
New energy vehicles (NEVs): up 31.7 percent year-on-year.
Growth across ownership types was uneven. Private enterprises saw a 5.9 percent increase in value-added output, while joint-stock companies expanded by 6.3 percent. Foreign invested enterprises, including those backed by Hong Kong, Macao, and Taiwan, grew by 3.9 percent, and state-owned enterprises (SOEs) lagged behind with a 3.8 percent rise.
Despite the slowdown in output growth, business sentiment improved modestly. The manufacturing Purchasing Managers’ Index (PMI) edged up to 49.5 in May, still in contractionary territory but up 0.5 percentage points from April. The business expectations index rose to 52.5, reflecting cautious optimism among manufacturers.
For the January–May 2025 period, industrial output increased 6.3 percent year-on-year overall, suggesting that China’s industrial base remains resilient overall. However, analysts warn that the second half of 2025 could bring renewed volatility, as the truce in US-China trade tensions remains fragile, with tariffs still levied on 55 percent of bilateral trade flows. Meanwhile, lackluster real estate investment and deflationary pressures continue to drag on industrial demand.
Service sector gains pace in May, led by modern industries and resilient domestic demand
China’s service sector continued to accelerate in May 2025, benefiting from strong growth in modern, technology-driven services and a steady recovery in domestic consumption. The services production index rose 6.2 percent year-on-year, a slight improvement over April’s six percent, signaling sustained momentum in the sector.
Key areas of growth included:
Information transmission, software, and IT services, which surged 11.2 percent year-on-year;
Leasing and business services, up 8.9 percent; and
Wholesale and retail trade, expanding by 8.4 percent.
These subsectors notably outpaced the overall service industry growth, reflecting a broader shift towards knowledge-intensive and digital services. Over the first five months, the services production index grew 5.9 percent year-on-year, while revenue for large-scale service enterprises increased by 7.2 percent in the January to April period.
Business confidence showed modest improvement, with the official services business activity index rising slightly to 50.2 in May, indicating ongoing expansion. Particularly active were sectors such as rail and air transport, postal services, telecommunications, satellite transmission, and internet/IT services, all posting activity indices above 55, highlighting strong operational momentum.
Independent data from the Caixin China Services PMI echoed these trends, showing growth at 51.1 in May, the fastest pace in three months, driven largely by domestic demand. Employment in the sector showed signs of recovery, breaking a two-month contraction, though the picture remained mixed. Some companies trimmed staff to manage costs, while others expanded hiring to meet rising demand.
Consumer demand rises steadily in May, driven by upgrade-oriented spending and trade-in incentives
China’s retail sales continued their robust recovery in May 2025, with total retail sales of consumer goods reaching RMB 4.13 trillion (US$574.53 billion), marking a 6.4 percent year-on-year increase — the fastest pace since December 2023. This growth outpaced April’s 5.1 percent rise, reflecting strengthening domestic consumption supported by government policies and rising consumer confidence.
Highlights from the month include:
Urban retail sales grew 6.5 percent year-on-year to RMB 3.61 trillion (US$502.19 billion);
Rural retail sales increased 5.4 percent to RMB 527 billion (US$73.31 billion);
Retail sales of goods rose 6.5 percent to RMB 3.67 trillion (US$510.51); and
Catering revenue expanded 5.9 percent to RMB 458 billion (US$63.71 billion).
Notably, consumer demand for upgrade-focused and lifestyle-related products remained strong, propelled by ongoing trade-in subsidies and consumption incentives. Key product categories showing exceptional growth were:
Household appliances and audio-visual equipment, soaring 53.0 percent year-on-year;
Communication equipment, up 33.0 percent;
Cultural and office supplies, increasing 30.5 percent; and
Furniture sales, rising 25.6 percent.
Between January and May, total retail sales climbed 5.0 percent year-on-year to RMB 20.3 trillion (US$2.82 trillion). Online retail sales further accelerated, reaching RMB 604 billion (US$64.02 billion) with an 8.5 percent growth, including a 6.3 percent rise in physical goods sold online, which accounted for 24.5 percent of total retail sales. Retail sales of services also expanded 5.2 percent over the same period.
Supporting factors behind this momentum include:
The consumer goods trade-in program, which has effectively stimulated upgrade purchases;
A surge in online shopping ahead of key e-commerce events like “6.18”;
Increased foreign tourist arrivals due to visa-free entry expansions; and
Government consumption vouchers and subsidies distributed across major cities.
Looking ahead, analysts caution that without continued government stimulus, consumption growth may slow, especially as some local governments pause trade-in subsidies due to funding exhaustion.
China’s 6.18 shopping festival, originally launched by JD.com, is a major mid-year e-commerce event held around June 18 that drives nationwide online sales through discounts and promotions, now rivaling Singles’ Day in scale and influence.
Investment expands, driven by manufacturing and high-tech sectors
Fixed asset investment (FAI) in China continued to expand in the first five months of 2025, reaching RMB 19.19 trillion (US$2.64 trillion), up 3.7 percent year-on-year. Excluding real estate development, FAI grew by 7.7 percent, underscoring stronger momentum in productive sectors of the economy. On a month-on-month basis, FAI rose by 0.05 percent in May.
Manufacturing remained the strongest growth driver, with investment rising 8.5 percent, while infrastructure investment increased by 5.6 percent. In contrast, real estate development investment declined sharply by 10.7 percent, continuing to weigh down overall FAI performance.
Investment by sector showed a clear divergence:
Primary industry: up 8.4 percent;
Secondary industry: up 11.4 percent; and
Tertiary industry: down 0.4 percent.
Private investment remained flat year-on-year. However, excluding real estate, private investment increased by 5.8 percent, indicating continued interest from the private sector in productive industries.
High-tech sectors sustained strong growth, driven by government policy support and rising demand for innovation:
Information services: up 41.4 percent;
Aerospace manufacturing: up 24.2 percent;
Computer and office equipment manufacturing: up 21.7 percent; and
Professional technical services: up 11.9 percent.
Despite the drag from the real estate sector, the steady rise in industrial and high-tech investment reflects China’s continued pivot toward innovation-driven growth and industrial upgrading.
Consumer prices remain subdued due to weak demand
China’s consumer prices edged lower in May 2025, reflecting continued soft demand in the economy. The national consumer price index (CPI) fell 0.1 percent year-on-year and declined 0.2 percent month-on-month. Core CPI, which excludes food and energy prices, rose moderately by 0.6 percent year-on-year, marking a 0.1 percentage point increase from April and indicating a mild pickup in underlying inflation.
Among categories, food, tobacco, and alcohol prices increased slightly by 0.1 percent year-on-year, with notable price movements including:
An 8.3 percent drop in fresh vegetable prices;
A 1.4 percent decline in grain prices;
A 3.1 percent rise in pork prices; and
A 5.5 percent increase in fresh fruit prices.
Other categories showed mixed trends:
Clothing prices rose 1.5 percent;
Housing prices increased marginally by 0.1 percent;
Household goods and services rose 0.1 percent;
Transportation and communication prices fell sharply by 4.3 percent;
Education, culture, and entertainment prices grew 0.9 percent;
Medical and healthcare prices increased 0.3 percent;
Other goods and services surged 7.3 percent.
From January to May, the average CPI was down 0.1 percent year-on-year, underscoring persistent low inflation pressures.
Producer prices remained deeply negative. In May, the producer price index (PPI) fell 3.3 percent year-on-year and 0.4 percent month-on-month. Input prices for producers declined 3.6 percent year-on-year and 0.6 percent month-on-month. Over the first five months of 2025, both producer and input prices dropped by 2.6 percent year-on-year.
How to read China’s May economic data
While China’s economic growth is expected to moderate in the second half of 2025, signs of resilience—particularly in domestic consumption and policy-driven sectoral upgrades—offer reasons for cautious optimism. Escalating trade tensions with the US and global economic uncertainties continue to weigh on exports and industrial output, placing pressure on traditional growth drivers like manufacturing and investment.
May 2025 data reflect these challenges, with persistent weakness in the property sector and continued softness in housing prices across most cities. These structural pressures, alongside a still-recovering labor market, suggest that consumer spending alone may not fully offset the drag from other areas in the near term.
Nonetheless, China’s steady pivot toward a more consumption- and innovation-driven growth model is gaining traction. Retail sales and services remain on an upward trend, supported by targeted policy incentives and the continued expansion of emerging industries. For foreign investors, these shifts signal not just short-term policy boosts, but evolving, longer-term opportunities in sectors aligned with China’s economic rebalancing priorities.