Beijing's efforts to stimulate consumption through trade-in subsidies have faced challenges as China's export growth slowed more than anticipated at the beginning of the year. In a move to encourage purchases of select goods, the Chinese government expanded its trade-in program in January to encompass smartphones and additional home appliances. Despite these measures, the country's exports in the January-February period rose by only 2.3% in U.S. dollar terms compared to the previous year, falling short of the expected 5% increase.
The slowdown in export growth has been exacerbated by external pressures, notably the imposition of tariffs by the United States. On February 4, the first round of a 10% tariff hike on Chinese goods, ordered by former President Donald Trump, took effect. In response, China has imposed retaliatory tariffs on select U.S. goods and restricted exports of certain critical minerals needed by the U.S., intensifying trade tensions between the two economic powerhouses.
Compounding these challenges, Chinese imports fell sharply by 8.4% year-on-year in the first two months of 2025, contrary to analysts' expectations of a modest 1% expansion. The unexpected decline indicates potential weaknesses in domestic demand, further complicating Beijing's economic strategy. In anticipation of additional tariffs, Chinese exporters have been hastily front-loading outbound shipments since late last year, hoping to circumvent further trade barriers.
The U.S., recognized as China's largest trading partner on a single-country basis, plays a crucial role in China's economic landscape. Last year, exports accounted for nearly a quarter of China's GDP, underscoring their significance to the nation's economy. Amid these developments, Trump has instructed his administration to investigate Beijing's compliance with a trade deal established during his first presidency in 2020. The outcome of this assessment, expected by April 1, could potentially lead to further tariff actions.