“China May Retail Sales Surge Amid Trade War: Export Goods Stay Home, Factory Output Slows on U.S. Tariffs”

Key Points

• It seems likely that China's retail sales increased in May 2025 as export goods stayed domestic due to tariffs.

• Research suggests U.S. tariffs impacted factory output, causing a slowdown.

• The evidence leans toward a mixed economic performance, with domestic consumption boosted but manufacturing challenged.

Retail Sales Boost

China's retail sales rose by 6.4% year-on-year in May 2025, driven by promotions of goods meant for export but sold locally due to higher tariffs. This reflects a shift toward domestic consumption.

Factory Output Impact

Factory output slowed, with manufacturing growth at 5.8% in May, down from 6.1% in April and 7.7% in March, likely due to U.S. tariffs affecting exports, which dropped 35% to the U.S. year-on-year.

Trade Context

Ongoing U.S.-China trade negotiations, with a deadline of August 10, 2025, continue to shape these trends, highlighting the complex impact of tariffs.

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Survey Note: Detailed Analysis of China's Economic Performance in May 2025

On June 16, 2025, at 01:29 AM PDT, recent economic data from China indicates a mixed performance in May 2025, with a notable boost in retail sales as export goods remained domestic, while factory output slowed due to the impact of higher U.S. tariffs. This report provides a comprehensive overview, synthesizing information from multiple news sources to ensure accuracy and depth, reflecting the current situation as of the specified time.

Economic Performance Overview

China's economy in May 2025 showed a dual trend, with domestic consumption receiving a boost while the manufacturing sector faced challenges. This mixed performance is attributed to the interplay of increased retail sales and the adverse effects of U.S. tariffs on factory output and exports. The data, reported by the National Bureau of Statistics of China, highlights the complexities of global trade dynamics on China's economy.

Retail Sales: Boost from Domestic Sales

Retail sales in China rose by 6.4% year-on-year in May 2025, a significant increase compared to previous months. This growth is partly due to promotions of goods that were originally intended for export but remained in China due to higher tariffs imposed by the U.S. The redirection of these goods to the domestic market, coupled with an online shopping festival and trade-in subsidies, contributed to the boost in domestic consumption. For the first five months of the year, retail sales grew by 5% year-on-year, indicating a sustained upward trend in domestic spending

.

The increase in retail sales reflects a strategic shift, where businesses are focusing on the domestic market to offset the decline in exports. Promotions of stranded export products, such as electronics and apparel, have been particularly effective, with consumers taking advantage of discounted prices. This trend is seen as a positive sign for China's economic resilience, especially in the face of external trade pressures.

Factory Output: Slowdown Due to Tariffs

In contrast, factory output experienced a slowdown, with manufacturing output growing by 5.8% in May year-on-year, down from 6.1% in April and 7.7% in March. This deceleration is directly linked to the impact of higher U.S. tariffs on Chinese goods, which have made exports less competitive and reduced demand for manufactured products. The Standard-Journal article confirms this slowdown, noting that factory output was affected by the tariffs, though specific numbers align with the Yahoo Finance report

.

The tariffs, part of ongoing U.S.-China trade tensions, have led to a significant drop in exports to the U.S., with a 35% year-on-year decline in May 2025. Total exports also grew at a slower pace, increasing by 4.8% in May compared to 8.1% in April, and falling short of the forecasted 6.5% growth. This indicates that the manufacturing sector is facing challenges, with factories adjusting to reduced export orders and seeking to reorient production toward domestic needs.

Trade Context and Tariff Impact

The higher U.S. tariffs are a critical factor in this economic scenario, with recent reports highlighting their impact on shipments. The tariffs, which were increased as part of trade policy under the current administration, have created a challenging environment for Chinese exporters. The Yahoo Finance article mentions ongoing negotiations between Beijing and Washington, with a deadline for a trade agreement set for August 10, 2025, and recent talks held in London last week

. These negotiations aim to address the tariff issues, but the threat of further tariff hikes remains, adding uncertainty to China's economic outlook.

The impact of tariffs is not limited to factory output; it also affects the broader supply chain, with some delays reported as both sides negotiate. Additional context from AP News articles linked in the Yahoo Finance report provides further insight into the trade dynamics, including the specific effects on exports and the ongoing discussions .

Summary Table: Key Economic Indicators for May 2025

Category	May 2025	Comparison	Reason
Retail Sales Growth	+6.4% year-on-year	Higher than previous months	Promotions of stranded export goods, online festival, subsidies
Manufacturing Output	+5.8% year-on-year	Down from 6.1% (April), 7.7% (March)	Impact of U.S. tariffs on exports
Exports to U.S.	-35% year-on-year	Significant decline	Higher tariffs reducing competitiveness
Total Exports Growth	+4.8% year-on-year	Lower than forecasted 6.5%, down from 8.1% (April)	Tariff-related challenges

This table encapsulates the core economic indicators, providing a quick reference for understanding the trends and their drivers.

Broader Implications

The mixed economic performance in May 2025 highlights the dual impact of trade policies on China's economy. While domestic consumption is showing resilience, with retail sales benefiting from redirected export goods, the manufacturing sector is under pressure from tariff-related export declines. This scenario underscores the importance of the upcoming trade negotiations and China's ability to reorient its economy toward domestic demand. The threat of higher tariffs, with an August 10 deadline, adds urgency to these discussions, potentially shaping future economic strategies.

Conclusion

In May 2025, China's retail sales received a boost as export goods stayed home, rising by 6.4% year-on-year due to promotions and domestic market focus, while factory output slowed to 5.8% growth, impacted by higher U.S. tariffs that also led to a 35% drop in exports to the U.S. The ongoing trade negotiations, with a deadline of August 10, 2025, continue to influence these trends, reflecting the complex interplay of global trade dynamics on China's economy.

Key Citations

• Yahoo Finance China gets boost in retail sales as export goods stay home

• Standard-Journal China gets boost in retail sales as export goods stay home

• AP News China trade exports Trump tariffs

• AP News Trump tariff economy trade court appeal

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