China announced a 5% economic growth target for 2025, a bold bid amid what is emerging as a full-blown trade war with the United States.
In a speech at this year’s National People’s Congress (NPC) opening ceremony on Wednesday, Chinese Premier Li Qiang said the Chinese economy will sustain growth momentum and remain a key anchor in an “uncertain” global economic landscape.
He said the gross domestic product (GDP) target of around 5% is practical, underscoring what he said is China’s resolve to meet difficulties head-on and strive hard to deliver. Li said the target aligns with the country’s mid- and long-term development goals.
He said the government would adopt a more proactive fiscal policy and a moderately loose monetary policy this year. Li also said other supportive measures would include the launch of special initiatives to boost consumption, the issuance of more ultra-long special treasury bonds, the allocation of a greater share of science and technology expenditures to basic research, and the development of new quality productive forces.
“China’s ability to weather headwinds and maintain long-term economic growth stems from its distinctive institutional strengths and many advantages, including an enormous market, a complete industrial system, a wealth of manpower and talent, and effective governance mechanisms such as long-term development plans,” Xinhua said in an article.
Without referring to the Sino-US trade war, Xinhua said the Chinese economy would continue to defy “skepticism” and deliver certainty for itself and the world.
It added that a booming landscape in fields including artificial intelligence, robotics, new energy and smart manufacturing will unlock the long-term potential of high-quality development. In January, DeepSeek unveiled its latest AI model, DeepSeek-R1, which is now widely used in China.
Beijing’s optimistic comments came after the Sino-US trade war intensified over the past month. On March 4, the US imposed another 10% tariff on all imports from China, following the previous 10% tariff, which took effect on February 4.
Before this, US President Donald Trump had already imposed an average 20% tariff on Chinese goods since the first round of the Sino-US trade war broke out in 2018.
While the US also imposed a 25% tariff on imports from Canada and Mexico, US Commerce Secretary Howard Lutnick suggested Tuesday that the US will soon reach tariff compromise deals with the two neighbours.
“The additional 10% plus 10% tariffs imposed on China will overall drag down China’s export growth by about three percentage points in 2025,” Ming Ming, chief economist at CITIC Securities, said in an article published on Wednesday.
“The new tariffs will pressure the exports of China’s textiles, clothing, toys, sports equipment, shoes and boots,” he says.
“However, since 2024, the growing demand for China’s goods from emerging markets such as ASEAN and Latin America has continued to increase, and the international competitiveness of China’s exports of mid-to-high-end manufactured goods has also gradually improved,” he said. “These factors are expected to hedge to a certain extent the negative impact of the US tariffs on China.”
When a 10% US tariff against Chinese goods took effect on February 4, Wang Tao, chief China economist and head of Asia Economic Research at UBS Investment Bank, said China might be affected by the intensifying Sino-US trade war.
“If the US imposes a 10% tariff on Chinese goods and continues to implement it, this may hurt China’s exports and domestic investment and consumption, thus dragging down China’s GDP growth by 0.3-0.4 percentage points,” she said.
She expected the Chinese currency to depreciate moderately while the Chinese government would increase policy support. She said China’s GDP growth for 2025 would be about 4%.
China’s retaliations
Trump initiated a new round of trade penalties against China because Beijing has not taken adequate measures to stop the supply of fentanyl precursors to Mexican drugmakers.
On Tuesday, China’s State Council Information Office published a White Paper to ensure supervision over fentanyl-related medications, strike hard against fentanyl-related crimes, enforce strict control over fentanyl precursors, adopt comprehensive measures for more efficient drug control and promote global governance of fentanyl-related substances.
“The US, not anyone else, is responsible for the fentanyl crisis inside the US. In the spirit of humanity and goodwill towards the American people, we have taken robust steps to assist the US in dealing with the issue,” said Lin Jian, a spokesperson of the Chinese Foreign Ministry.
“Instead of recognizing our efforts, the US has sought to vilify and shift the blame to China and is seeking to pressure and blackmail China with tariff hikes. They’ve been punishing us for helping them.”
Lin stressed that intimidation and bullying cannot scare China. He said the US should consult with China based on equality, mutual respect and mutual benefit to address each other’s concerns if it wants to solve the fentanyl issue.
“If the US has other agenda in mind and if war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,” Lin said.
China’s Customs Tariff Commission of the State Council said Tuesday it will impose an additional 15% tariff on imported chicken, wheat, corn, and cotton from the US on March 10. It also said the United States’ sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products will be subject to an additional 10% tariff.
From February 10, China has imposed a 15% tariff on eight types of US energy products, including coal, liquified natural gas and coking coal. It has also imposed a 10% tariff on 72 types of US goods, including agricultural machines, crude oil, large displacement cars and electric vehicles.
Losing US orders
While China’s tariffs hurt American exporters, many Chinese manufacturers are losing American orders and facing heavy financial pressure.
“When Trump said in a post on Truth Social on February 26 that he would double the US tariffs to 20% for Chinese goods, small shops in Yiwu in Zhejiang began panic selling,” a Hubei-based business columnist wrote in an article. “Shop owners knew that they had to sell as many goods as possible before March 4 or they would lose money.”
The writer says Wang Jianjun, a Zhejiang-based maker of Christmas lights, has 3 million yuan ($413,705) of goods on hand, targeting a slim margin of 5%. He says Wang is now facing a negative 15% margin or a net loss of 70,000 yuan due to Trump’s tariffs.
He says Zhang Lei, a manufacturing boss in Shenzhen, recently borrowed 2 million yuan to upgrade his production facilities but then lost 40% of orders. Zhang now owes his workers 180,000 yuan and can’t repay the bank loans.
AMZ123, a Chinese website, said Chinese exporters targeting Amazon shoppers in the US have experienced a cold winter since early February. It said some Chinese exporters saw a 50% decline in orders while others could not sell anything at all over the past month.
It said some US consumers have reduced their purchases to save more money because they expect inflation to return.
On January 20, 2020, Trump and then-Chinese Vice Premier Liu He signed the Phase One Trade Deal, in which China agreed to buy more American goods to reduce its trade surplus with the US.
However, after the Biden administration took office in Washington in January 2021, it did not request China to meet the Phase One Trade Deal requirements. In the end, China only fulfilled about 60% of the specified goods trade amount.
Last year, China enjoyed a trade surplus of $295.4 billion with the US, compared with $419.2 billion in 2018. The decline was partly due to some Chinese manufacturers relocating their factories to Southeast Asian countries to avoid US tariffs, including through transshipment.
In 2024, the United States’ trade deficit with ASEAN was $227.7 billion, up from $99.6 billion in 2018. ASEAN’s trade deficit with China grew to $190 billion last year from $73 billion in 2018.
China’s surplus with ASEAN increased by about $120 billion in 2024 compared to 2018, roughly offsetting the decline in the country’s surplus with the US. In other words, Trump’s 2018 tariffs forced some Chinese manufacturers to leave mainland China but did not actually help the US cut its trade deficit with China.
Yong Jian is a contributor to the Asia Times. He is a Chinese journalist who specializes in Chinese technology, economy and politics.
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