Bangkok. China’s economy grew at a 5.4 percent annual pace in the January–March quarter, supported by strong exports ahead of steep tariff hikes imposed by U.S. President Donald Trump, the government said Wednesday.

Analysts warn that the world’s second-largest economy may slow significantly in the coming months as tariffs of up to 145 percent on Chinese goods take effect.

Exports were a key driver in achieving the 5 percent growth target set by the government for 2024. Beijing has maintained its target for the year at around 5 percent, despite mounting global headwinds.

In response to US tariffs, China has imposed retaliatory tariffs of up to 125 percent on American exports. At the same time, it continues to promote openness to trade and foreign investment.

On a quarterly basis, China’s economy expanded by 1.2 percent in the first three months of the year.

Exports surged more than 12 percent in March and nearly 6 percent for the full quarter, as companies rushed to ship goods before the US tariffs took hold. The export boom has helped sustain robust manufacturing activity in recent months.

However, despite relatively strong growth by global standards, China continues to struggle with a broader economic recovery following the COVID-19 pandemic. A lingering property sector downturn --triggered by a government crackdown on excessive developer borrowing-- has weighed heavily on consumer and investor confidence.

The escalating tariff conflict presents yet another challenge for policymakers attempting to stimulate investment, boost hiring, and encourage domestic consumption.

Economists remain cautious about the outlook, particularly amid uncertainty surrounding Trump’s shifting trade policies.

“Given the events over the past two weeks, it is extremely difficult to predict how the US and China tariffs on each other might evolve,” UBS economists led by Tao Wang said in a report.

Despite the tensions, the International Monetary Fund and the Asian Development Bank have maintained more optimistic forecasts, projecting around 4.6 percent growth for China in 2024.

Since returning to office, Trump initially ordered a 10 percent tariff increase on Chinese imports, later raising it to 20 percent. Most Chinese exports to the US now face tariffs of up to 145 percent.

UBS estimates that if the tariffs remain at current levels, China’s exports to the US could fall by two-thirds in the coming months. The bank also forecasts a 10 percent drop in China’s global exports by dollar value. As a result, UBS has revised its full-year growth forecast down to 3.4 percent from 4 percent, and expects growth to slow further to 3 percent by 2026.

In response, Beijing has ramped up efforts to stimulate domestic demand. Over the past seven months, it has expanded subsidies for auto and appliance trade-ins and directed more funding toward housing and other cash-strapped sectors.