China’s Economic Engine Sputters: Growth Hits 3-Year Low Despite Trump Trade Boost

Forget the trade war truce—China's economic slowdown just slammed into a new gear.

The Numbers Don't Lie

Growth slumped to its lowest point in three years. That's the headline figure, and it cuts through the political noise like a hot knife. A Trump-era trade lift was supposed to fuel the engine, but the data shows an economy hitting the brakes instead.

Behind the Headline

Markets expected a rebound. They got a reality check. The posturing and tariffs created temporary lifts, but structural headwinds—debt, demographics, and a property sector on life support—proved heavier. It's a classic case of political theater failing to rewrite economic fundamentals.

The Global Ripple

When the world's second-largest economy coughs, everyone catches a cold. Commodity markets flinch. Supply chains reassess. Central bankers everywhere start sweating into their spreadsheets. This isn't just a Beijing problem; it's a liquidity problem waiting to happen.

The Cynical Take

Wall Street analysts will spin this six ways to Sunday—'targeted stimulus,' 'long-term restructuring,' blah blah. Translation: the old growth playbook is exhausted. It's the financial equivalent of rearranging deck chairs on the Titanic, just with more PowerPoint slides.

So much for the trade deal magic. The real economy just called the bluff.

Strong exports offset weak consumer activity at home

One of the biggest sources of strength for the Chinese economy in 2025 was exports. China set a record trade surplus of nearly $1.2 trillion last year. A trade surplus means the country sold more to other countries than it bought from them. 

This occurred even though Chinese exports to the United States fell by about 20% due to higher U.S. trade tariffs under President Donald Trump. But China made up for this by selling more to countries such as Africa, Southeast Asia, Europe, and Latin America.

Exports have been key to helping China reach its 2025 growth target. But domestic spending did not grow much. Consumers didn’t buy as much in stores, and many businesses didn’t build new factories or houses.

Since people are not spending more, the prices of many goods and services in China have remained the same or even fallen, leading to deflation. When people anticipate that prices will fall later, they may postpone spending, which slows economic growth.

On top of that, investment has been weak. Some forecasts indicate that fixed-asset investment, one of the largest parts of economic activity, fell or grew only slightly in 2025. These weak trends make it clear that the economy is unbalanced – exports are strong, but consumption and investment at home are slow.

China faces a tougher road ahead

Given these patterns, strong exports and weak domestic spending, many experts believe China will have to adjust its economic growth strategy. Leaders in Beijing have stated they want individuals to consume more goods and services domestically and depend less on exports. They are also trying to figure out how to promote company jobs and give people more freedom to spend. 

One idea is to lower interest rates so it is easier for businesses and families to borrow from banks. This could encourage individuals to purchase homes, start businesses, and spend more. China’s central bank has begun cutting some rates to help Core industries like technology and agriculture, and could further boost the economy. Yet there are still dangers ahead. Growth is likely to slow further in 2026 to about 4.5%, and experts say that if exports slow, China will have to rely on other policies – including government spending – to promote the economy. 

Slow domestic spending, coupled with persistent deflation, also means China will need to make significant efforts to turn its economy around and put it on an upward trajectory. As a result, Chinese families and workers may expect fewer new jobs than before and slower income growth unless consumer confidence improves. Stores, eateries, and small businesses may still suffer if people continue to save rather than spend. Meanwhile, strong exports will remain a key factor in keeping the economy going.

Sharpen your strategy with mentorship + daily ideas - 30 days free access to our trading program