China’s Economic Struggles in July
China’s economy displayed signs of fatigue in July, as officials acknowledged the pressure from US tariffs. According to various reports, the numbers coming out of Beijing were less than encouraging.
Data released on Friday revealed that industrial output, retail sales, and investment figures all fell short of predictions, although the unemployment rate was kept in check. This decline unfolds amidst ongoing trade discussions with the Trump administration, heightening challenges for a nation reliant on exports.
Fuhringy, the spokesperson for China’s National Bureau of Statistics, highlighted the complicated international situation in July, mentioning the ongoing effects of trade protectionism and unilateral actions.
Factory production did not fare well, dropping 5.7% year-on-year compared to a 6.8% increase in June. Retail sales growth plummeted to 3.7%, marking the slowest rate of 2025 so far. The unemployment rate also edged up to 5.2%, largely due to a surge in job-seeking university graduates struggling to find work.
It’s interesting—perhaps concerning—to think about how the authenticity of China’s official statistics has often been questioned. Some analyses imply that the actual economic downturn could be more severe than reported.
A truce in trade was temporarily reached in May, which delayed imposing additional tariffs. However, the ongoing 30% tariff on Chinese goods remains significantly high, particularly when compared to earlier levels set during the Biden administration. The Trump administration has also tightened loopholes that had previously allowed for certain tariff exemptions.
Although overall exports saw a 7.2% increase, this was accompanied by a notable 22% drop in shipments to the US in July compared to the previous year. The Chinese government is purposely attempting to moderate growth in specific industrial areas to address issues of “overcapacity.”
Additionally, China’s housing market continues to face significant challenges, with declining property values eroding the wealth of the middle class and shaking consumer confidence. Recent banking data pointed to a contraction in lending, the first of its kind in nearly 20 years.
On another note, the US trade deficit fell to its lowest point in two years in June, while its trade gap with China dwindled to levels unseen since 2004.
