A worker sweeps leaves along the Bund across from buildings in Pudong’s Lujiazui Financial District in Shanghai, China.
Qilai Shen/Bloomberg
Whatever one thinks of China, investors betting against it haven’t made much money over the last decade. Year after year, Asia’s biggest economy has an uncanny knack for making its numbers against all odds.
The reference here is to Beijing’s annual growth targets, this year’s being “around 5%.” When Chinese leader Xi Jinping’s team announced its 2025 goal, the word “around” seemed to be doing a lot of work. Between U.S. tariffs and China’s deflation-fueling property crisis, 5%-range gross domestic product growth seemed rather fanciful.
And yet, short sellers wagering against China’s 2025 prospects are having a rough year-end. And, perhaps, China bears are in for an even tougher 2026 as China grows as much as 6%.
That, at least, is how economists at Goldman Sachs are looking at the 12 months ahead — and beyond. In a new report, Goldman Sachs economists Andrew Tilton and Hui Shan argue Chinese growth will be as high as 6% for the “next few years.”
If so, no one will be more surprised than President Donald Trump or his Treasury Secretary Scott Bessent. Both men have spent much of 2025 effectively trying to slash China’s economic tires. Though Trump World has shared its import taxes wide and far, the trade war is all about hobbling China. And stopping Xi’s economy from surpassing the U.S. in GDP terms.
One reason it hasn’t gone to Trumpian plan is that China was ready for this moment. The Trump 1.0 years taught Xi to pivot away from the U.S. Since then, Southeast Asia became China’s biggest market, followed by the European Union. That the U.S. is merely No. 3 explains why the tariffs are arguably hurting U.S. households much more than the Chinese
As such, Chinese “export growth has been surprisingly strong in 2025,” Tilton and Shan argue. They reckon that real exports are on track for about 8% full-year growth this year, “demonstrating the competitiveness of Chinese products across a wide range of industries relative to global peers.”
Clearly, there are almost too many caveats to count here. For example, the deflation bearing down on China’s $19 trillion economy would be easier to battle if the property sector weren’t quaking. The same goes for the trillions of dollars of debt strangling local government finances and sky-high youth unemployment.
As Japan has proven, an aging and shrinking population is inherently deflationary. Folks in their 70s and 80s don’t spend the way those in their 20s and 30s do. Nor are the average 1%-2% wage gains in most Chinese provinces, at best, in 2024 sufficient to restore pricing power to a ginormous, unbalanced developing nation.
And then there’s Trump. Can we really trust that the most mercantilist president in 125 years is done with tariffs? The more Trump’s domestic agenda goes awry and his approval ratings suffer, the more he might lash out internationally. The same goes for Trump realizing his trade deals with Japan, South Korea and the European Union might not go as planned.
Surely, Trump will notice at some point that Tokyo isn’t wiring the $550 billion “signing bonus” the White House demanded. Ditto for Seoul and the $350 billion payment that Trump seemed to think would be at the Treasury by now. And that 600 billion euro “gift” Trump is waiting on from the EU? As the wait grows longer, who knows where EU tariffs might go next year?
Still, if Goldman Sachs is right, China could trigger Trump in unpredictable ways in 2026 by refusing to slow down on cue. The more China runs circles around the White House, the more U.S. consumers will realize Trump’s trade war is really against them.
