Trump Trade War: China’s Growth Stalls as Tariffs Shake Global Markets

China’s economy is losing momentum. The chart below shows that GDP grew by just 4.8% year on year in Q3 2025, marking the slowest pace in a year. This was down from 5.2% in Q2 2025 and highlights growing pressure from Trump’s tariffs and China’s deepening property market crisis.

The Trump administration’s “reciprocal” tariffs continue to reshape China’s export landscape. As domestic demand weakens, China has become more reliant on manufacturing and external trade.

Moreover, Chinese consumers and businesses remain cautious. The chart below shows that China’s retail sales growth slowed to 3% in September, down from 3.4% in August. This slowdown reflects fragile consumer confidence and weaker household spending.

On the other hand, property investment plunged by 12.9%. This sharp decline indicates ongoing weakness in the property market, reduced confidence in future real estate demand, and tighter liquidity conditions.

The above discussion indicates that China’s property sector is facing a serious crisis, as new home prices have also declined. Authorities may need to act soon to stabilize the housing market.

China Diversifies Exports as U.S. Trade Declines Sharply

China’s global trade remains a key driver of its slowing economy. Exports to the U.S. have dropped by 27% year over year, but China has expanded shipments to Europe, Southeast Asia, and Africa. Exports to Africa surged by 56.4%, reflecting China’s efforts to reduce dependence on the U.S.

These strong export orders point to a possible recovery in industrial output. The chart below shows that China’s industrial production expanded by 6.5% in September 2025, up from 5.2% in August, and above the 5% forecast.

This marks the fastest increase in industrial production since June, indicating some resilience in the manufacturing sector despite broader economic headwinds.

This growth is driven by faster expansion in manufacturing activity and mining output. The chart below shows that China’s manufacturing activity rose to 7.3% in September, up from 5.7% in August. This strong growth may help China to meet 5% annual growth target.

S&P 500 Resilient Despite China Slowdown and Trade Tensions

China’s slowdown affects global supply chains and commodity demand, but the S&P 500 (SPX) has remained strong in 2025. The recent gains in the index are driven by AI-related tech stocks and resilient U.S. consumer spending. These gains have helped offset weakness in globally exposed sectors like retail and industrials.

While earnings growth is slowing, the market is looking past short-term risks tied to Chinese demand and Trump’s tariff threats.

However, sectors with deep China exposure, including semiconductors, autos, and materials, could face headwinds if global trade tensions escalate further.

The chart below shows that the S&P 500 pulled back last week on renewed U.S.-China trade tensions, but found support at the red dotted trendline. The broader trend remains bullish, supported by the emergence of an inverted head and shoulders pattern. Therefore, a break above 6,750 could push the index toward the 7,000 level.

Final Words: The Trump Trade War isn’t over yet.

Tariffs have pushed China to change its trade strategy, disrupted global trade flows, and revealed serious weaknesses in its economy.

With expected talks between He Lifeng and U.S. Treasury Secretary Scott Bessent, the world is watching closely to see whether tensions ease or escalate.

Overall, markets may remain volatile as investors respond to ongoing tariff risks, China’s slowdown, and uncertainty around the Federal Reserve’s next move.