China’s Q1 GDP Surpasses Expectations Amid Tariff Tensions, Lifting AUD/USD

China’s first-quarter GDP exceeds expectations. Provides a boost to the dollar despite facing challenges from tariffs.

China’s economy grew by 5.4% in the quarter of 2025 compared to the period last year and beat expectations of 5.1%. These figures are similar to those reported in the quarter of 2025 despite facing challenges, from trade tariffs imposed by the United States that have impacted trade and market confidence.

The signs show that the local economy is stable, with growth trends in sectors; Retail sales spiked by 5·9% in March compared to a mere 4·0% in January and February; the national unemployment rate decreased from 5·4% to 5·2% within a month; and industrial output surged by 7·7% year over year indicating robust export performance potentially due, to businesses rushing shipments before facing higher trade expenses.

The data confirms that Beijing is making progress, in steering growth towards demand while also bringing a sense of reassurance to markets dealing with increasing tensions In the beginning of April the U.S ​​increased its average tariff on goods from China to 145%, prompting a swift response, from China which imposed tariffs at 125%​​​​ 🇺🇸🤝🇨🇳

The currency markets reacted promptly to China’s strength as the Australian dollar saw a rise of up to 0.17%. This increase was observed in the trading session on Wednesday. Was influenced by the positive GDP results and robust consumer figures. Australia’s close trade ties with China often result in fluctuations in the AUD based on China’s performance. Traders at markets4you find this correlation beneficial when important economic indicators such as GDP or retail data are released.

Equity markets didn’t quite match that level of excitement, though there was a bit of a dip as Hong Kong’s Hang Seng Index fell by 1·72%, settling at 21,098 around mid-period. Traders seemed a bit wary while watching the increasing tension between Washington and Beijing and its potential impact on economic growth· The Asian stock market might see some ups and downs for a while until there is clarity on trade talks·

The period projections for growth show a trend with Morgan Stanley revising its 2025 annual forecast to 4.2%, with UBS estimating a lower figure of 3.4%. Both firms emphasize concerns related to the ongoing trade disagreements and the unclear schedule for potential economic stimulus measures by Chinese authorities.

Markets will now be closely watching Beijing’s actions regarding infrastructure investment levels and credit policies, as potential consumer incentives are expected shortly. Any indications of increased cooperation or reduced tensions in trade discussions between the United States and China could swiftly impact market sentiment, especially affecting currency pairs, like the Dollar to U.S. dollar exchange rate and stock indices tied to economic growth.