China's Exports Thrive Amidst US Tariffs: Unveiling the Hidden Factors
In the first half of 2025, China's global export growth defied expectations, growing by 5.9%, despite a significant slump in exports to the United States due to tariffs. This resilience can be attributed to strategic diversification of export markets, supply chain adaptation, robust domestic consumption, and continued competitiveness in key sectors.
ING's Chief Economist for China, Lynn Song, wrote that external demand from other economies has offset much of the burden from the US. Goldman Sachs analysts concurred, stating that China's exports had remained "robust" due to the redirection of trade flows.
A key factor in China's export growth was the strong growth in exports to ASEAN, Africa, India, and Mexico. This shift, supported by companies redirecting surplus export capacity and adapting to new trade frameworks, saw ASEAN accounting for 18% of exports compared to 12% in 2017.
The flexibility of trade in goods and the ability of Chinese exporters to redirect trade flows played a significant role in this resilience. Firms adapted to tariffs by relocating or deepening integration with new regional manufacturing hubs, even as U.S.-Vietnam tariffs tried to close transshipment loopholes.
Robust industrial production and domestic demand also bolstered overall economic vitality, indirectly supporting export resilience. New consumption trends and innovation strengthened economic fundamentals, supporting export sectors. China's exports increased 5.8% year-on-year in the first half, reflecting this broader momentum, despite a 3.9% rise in June exports specifically.
China maintained leverage in technology, green energy, and manufacturing that helped preserve export momentum. While the US tariffs caused significant declines in key categories, such as electrical machinery and smartphones, China's strategic shifts allowed net exports to still contribute positively to GDP growth by 1.7 percentage points in H1 2025.
China's auto exports grew by 8.1 percent year-on-year in the first half, with high-tech exports significantly increasing. There were double-digit percentage increases in semiconductors, lithium batteries, electric vehicles, and machinery parts. Despite a 16% drop in exports in June, due to a trade truce between China and the US, analysts expect exports to continue being a key growth driver and could help China achieve its growth target of around five percent this year.
However, analysts expect China's growth to moderate in the second half of the year. The declines mainly affected Belgium and Germany, while auto exports to Italy and Spain increased. High EU tariffs caused auto exports to the EU to fall by only 5.2 percent in the first half. In contrast, only 2.1 percent of China's total auto exports went to the USA in 2021, with 14.6 percent delivered to the European Union.
As long as global growth remains stable and end demand is healthy, Chinese exports are likely to continue to rise, according to Goldman Sachs analysts. The resilience of China's exports can be attributed to the flexibility of trade in goods and the ability of Chinese exporters to redirect trade flows, as well as the robustness of China's domestic economy and its competitive edge in key sectors.
What role did the redirection of trade flows play in China's export growth resilience? Technology also contributed to China's export resilience, with high-tech exports significantly increasing during the first half of 2025.
