Believe it or not, China’s economic growth may take a sharp hit this year. It is an alarming development driven by the escalating trade war with the United States. According to analysts at Barclays, the ongoing standoff is placing severe pressure on China’s economy, although the country appears ready to expand stimulus measures and use every available tool to stay afloat.
Barclays estimates that China’s GDP could shrink by 1.5% to 3%, following the imposition of cumulative 145% tariffs by US President Donald Trump. In retaliation, Beijing introduced 125% tariffs on American goods. Barclays suggested that the escalating trade war between the United States and China was likely to produce a deflationary effect, as the resulting pressure on exports would further exacerbate China’s domestic economic challenges.
Barclays previously stated that its growth forecasts already account for uncertainties regarding Beijing’s potential countermeasures, tariff reductions, fiscal stimulus efforts, and the possibility of the United States rolling back certain tariffs. Last week, the White House announced that electronic imports would be temporarily exempted from the 145% tariff hike. President Trump clarified that this was a short-term adjustment, and the final tariff rate for electronics would be determined later.
Barclays' currency strategists also acknowledged the possibility of further fiscal stimulus from Beijing. Particular focus is expected to fall on measures aimed at supporting households and boosting consumer spending. Increased investment in artificial intelligence is also likely to play a key role in China’s growth strategy.
In March 2025, China’s trade balance exceeded expectations, thanks to a surge in exports. Chinese manufacturers rushed shipments to the US ahead of Trump’s tariff deadline. The upcoming April trade data will offer a clearer picture of the trade war’s full impact on the Chinese economy.
