China maintains 5% growth goal, boosts fiscal spending as U.S. tariffs rise

China kept its 2025 economic growth target at roughly 5% while committing to higher government spending to counter deflationary risks and the impact of escalating U.S. trade tariffs, according to a government report released Tuesday.

Increased Fiscal Measures

Budget deficit target raised to 4% of GDP (up from 3% in 2024).
1.3 trillion yuan ($179 billion) in special treasury bonds to be issued.
Local governments can issue 4.4 trillion yuan in special debt (up from 3.9 trillion).

Growing Trade War Concerns

Beijing faces pressure as U.S. President Donald Trump’s administration ramps up tariffs, adding 20 percentage points to Chinese imports since January.

Chinese exports to the U.S. exceed $400 billion annually, but higher U.S. trade barriers threaten manufacturers.
China retaliated Tuesday, imposing 10%-15% tariffs on U.S. agricultural products and sanctioning 25 American firms.

Domestic Challenges & Economic Shift

China’s economy struggles with sluggish consumer demand and a crisis in the debt-laden property sector. Analysts urge Beijing to stimulate household spending rather than rely on exports and industrial expansion.

“Boosting domestic household consumption is key,” said Eswar Prasad, former IMF China director.

Despite leading in EVs and AI, experts warn that China’s innovation drive must be balanced with consumer demand growth to avoid stagnation like Japan’s economic slowdown.

With Premier Li Qiang set to outline policies on Wednesday, China faces a critical test in navigating trade tensions and internal economic imbalances.

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