China’s Counter to Trump’s Tariffs - Growth Despite Pressure

Donald Trump had hoped to bring China’s economy to its knees with punitive tariffs. But the reality reflected in the new figures from Beijing paints a different picture: despite tariffs of up to 145 percent in spring 2025, China’s economy continues to grow – slowly but deliberately, driven by massive investments in industry, infrastructure, and a shifted export model. According to the Chinese statistics bureau, the world’s second-largest economy grew by 1.1 percent in the second quarter compared to the previous quarter. On an annualized basis, this would amount to growth of 4.1 percent. Not a boom – but also not a collapse. And for a country that is currently being economically attacked head-on by the United States, this figure is a political signal: we are not breaking down, we are restructuring. What is driving the upswing is a clear strategy. Demand from the US remains subdued due to Trump’s tariffs, even though there was a slight recovery in June after a tariff pause. But China has long since begun to shift its export markets. Southeast Asia, Africa, Europe – the trade network is global, and a portion of the exports is in any case rerouted through third countries back into the United States. At the same time, Beijing is investing heavily in new factories, in the expansion of the high-speed rail network, in large, state-supported projects. Construction activity on high-speed lines is compensating for the slump in the real estate sector, where the development is dramatic: minus 11.2 percent in the first half of the year.

The weak consumer mood among the Chinese population is unmistakable. Retail sales declined slightly in June – a symptom of the ongoing real estate crisis, which has unsettled the middle class. Many Chinese are saving wherever they can, and even the government-supported subsidy programs – for example, for electric cars or air conditioners – are reaching their financial limits. Some cities already had to cancel the program in June because the money ran out. Nevertheless, a mixed picture emerges: the domestic economy is weak, but the industrial sector is running at full speed. This even led Oxford Economics to raise its forecast for 2025 to 4.7 percent. Exports continue to drive production – even though overcapacity in many sectors is leading to falling prices and pressure on margins. Much points to an increasing dependence on global demand – a return to an old growth model that China actually wanted to leave behind. But this balancing act comes at a price: deflation is omnipresent. Housing, cars, consumer goods – everything is getting cheaper. While this may sound good for consumers, it burdens companies, squeezes profits, and causes wages to stagnate. And while the government tries to counteract this – with low interest rates, with investment incentives, with a cautious expansion of consumer support – the structural weakness in the domestic economy persists.

It is telling that the leadership continues to hold on to the target of “around 5 percent” growth – a political ambition that recalls the old rhetoric of stability and progress. Yet many economists doubt the real significance of the growth figures. Because they do not reflect the loss of confidence the population has suffered in the real estate market – nor the social tension affecting a population whose pensions in some places amount to just 20 dollars a month. What remains is a paradoxical situation: China is growing, but it is growing asymmetrically. The production side is strong, consumption is weak. Exports are flourishing, the domestic market is stagnating. And the country is resisting with all its might a development that could call the entire model into question – an order based on debt, industry, and state control, now colliding with a globalized, digitalized, unstable future. That China, of all times, under Trump’s second presidency is once again turning to tactical pragmatism – evading, rerouting, restructuring – is not only economically noteworthy. It is a geopolitical case study in resistance without confrontation. Trump delivers tariffs, China delivers counter-models.