China's economy slumps amid Trump's trade war

Telegraph

2 days ago

China's economy suffered a sharp slowdown last month as Donald Trump's tariff blitz fuelled uncertainty among households and businesses.
Retail sales missed economists' expectations while factory output growth slumped to an eight-month low in July, according to Beijing's National Bureau of Statistics.
The pace of investment also declined in the first seven months of the year, while data revealed continued weakness in China's ailing property sector.
Mohamed El-Erian, an economist at Allianz, said: 'China's latest economic numbers are likely to ring alarm bells in policymaking circles.'
The latest downturn comes as the world's second largest economy faces mounting pressure from the US president's trade war.
China and the US reached a temporary trade truce in May after both sides imposed tit-for-tat tariffs of more than 100pc. This was recently extended until November.
However, uncertainty over tariffs appears to have fed through to consumers, with annual retail sales growth declining from 4.8pc in June to 3.7pc in July, which was much lower than the 4.6pc expected by analysts.
Economists said consumer confidence has also been hit by the protracted slowdown in the nation's property sector, a key store of household wealth.
New home prices fell by 2.8pc in July compared to the same month a year earlier, following a 3.2pc drop in June.
Lynn Song, a ING economist, said: 'The accelerating downturn in property prices in the past few months signals that further policy support is needed.
'It's difficult to expect consumers to spend with greater confidence if their biggest asset continues to decline in value every month.'
Meanwhile, China's factory production and day-to-day business operations have been disrupted by record-breaking heat as well as storms and floods across the country.
Industrial output grew 5.7pc in July, which was the lowest reading since November and down from a 6.8pc rise in June.
Investment in factory equipment grew just 1.6pc in the first seven months of the year from the same period last year, compared with an expected 2.7pc rise.
Economists warned that China had become dangerously reliant on state spending to fuel growth.
Xu Tianchen, of the Economist Intelligence Unit, said: 'The economy is quite reliant on government support, and the issue is those efforts were 'front-loaded' to the early months of 2025, and by now their impact has somewhat faded out.'
Zichun Huang, an economist at Capital Economics, added: 'We see little reason to expect much of an economic recovery during the rest of this year.
'The lack of committing to any additional fiscal support in the latest Politburo meeting points to a fading fiscal tailwind.'
Meanwhile, China is not the only nation showing signs of pressure from Mr Trump's tariff tirade.
Narendra Modi, the Indian prime minister, urged the country to embrace 'self-reliance' in the face of US tariffs, which are expected to hit 50pc later this month.
In an address on the nation's Independence Day, he said he wants India to manufacture everything from fertilisers to jet engines and electric vehicle batteries.