A year ago, in May 2024, an International Monetary Fund (IMF) mission concluded a visit to China, expressing cautious optimism about the country's economic trajectory. The IMF projected that China’s GDP growth would remain resilient, estimating a 5 percent expansion in 2024 and a moderation to 4.5 percent in 2025. Inflation was expected to edge up but remain subdued. The IMF also emphasized the need for a continued and orderly correction in the property sector. It acknowledged that while the housing market adjustment was necessary to steer the sector toward long-term sustainability, it also carried downside risks. Beijing had already begun implementing support measures – including lending for affordable housing – to facilitate this transition, though calls for a broader, more comprehensive policy package remained. Despite this measured optimism, data released shortly afterward pointed to weakness in the industrial side of the economy. China’s official Manufacturing Purchasing Managers' Index (PMI) unexpectedly dropped to 49.5 in May 2024 from 50.4 in April, slipping below the expansionary threshold of 50 and missing expectations. The reading added urgency to calls for renewed stimulus as external demand faltered and domestic momentum remained fragile.
Fast forward to May 2025, and the picture has grown more complex. China began the year on a stronger-than-expected note, buoyed by robust foreign trade and industrial performance. According to the National Bureau of Statistics, first-quarter GDP reached RMB 31.88 trillion (approximately USD 4.40 trillion), growing 5.4 percent year-on-year in real terms. This exceeded market forecasts, outpacing Reuters poll projection. One of the key contributors to this outperformance was the strong rebound in exports. In yuan terms, exports expanded 6.9 percent year-on-year, with March alone posting an impressive 13.5 percent jump. Trade in equipment manufacturing also showed resilience, with exports and imports in the sector rising 7.6 percent. Notably, exports of selfdeveloped brands climbed 10.2 percent, raising their share of total outbound shipments to 22.8 percent. China's electric vehicle sector was a standout, with 1.54 million vehicles exported in Q1, including 570,000 in March – both representing year-on-year increases of 16 percent. Altogether, China’s exports surpassed RMB 6 trillion (USD 827.7 billion) in the first quarter, underpinned by demand from over 170 markets. Double-digit growth in specific segments such as sports equipment to the EU and cosmetics to Southeast Asia further highlighted the breadth of China's global trade footprint.
Yet this strength masks underlying fragilities. Analysts warn that the surge in exports may reflect a temporary “pre-tariff rush,” as exporters raced to beat impending tariff hikes from major Western economies. The intensifying trade war – particularly with the United States and European Union – now threatens to unwind much of the early-year momentum. Over the past year, the trade conflict has expanded dramatically, with tariffs targeting strategic sectors such as EVs, solar panels, semiconductors, and green technologies. In 2024, the U.S. began ratcheting up tariffs on Chinese clean-tech exports, citing overcapacity and unfair subsidies. By 2025, this effort has widened under the banner of "economic security". Meanwhile, the EU has aligned more closely with Washington, launching its own investigations into dumping practices and imposing retaliatory tariffs, particularly on EVs and renewable energy products.
Some of this pressure has already begun to make its mark. In April 2025, China’s official Manufacturing PMI fell to 49.0, the lowest reading since December 2023. The decline was led by a sharp drop in new export orders, which fell to 44.7 from 49.0 the month before, reflecting mounting pressure on China’s export-reliant sectors. The overall new orders sub-index dropped to 49.2 from 51.8. Looking ahead to May, early signals suggest that factory activity likely contracted for a second consecutive month. A Reuters poll of 21 economists forecast the official PMI to register at 49.5, indicating that manufacturing continues to struggle under the weight of trade tensions. With simultaneous disputes unfolding with both Washington and Brussels, the risk of a deeper exportled slowdown is growing – particularly if a durable resolution remains elusive.
On the diplomatic front, volatility has only increased. April 2 marked a new phase in the trade war, when President Trump declared a “Liberation Day” policy – imposing a blanket 10 percent reciprocal tariff on all imports and threatening to raise tariffs on Chinese goods by an additional 50 percent unless Beijing rolled back its own 34 percent retaliatory duties. A week later, the U.S. hiked tariffs on Chinese imports to 125 percent, while pausing additional levies on 57 other countries for a 90-day period. China quickly responded with a 34 percent tariff on U.S. imports, and Canada and Mexico signaled they would follow suit. Then, on May 12, in a brief attempt to de-escalate, the U.S. and China announced a 90-day tariff truce following talks in Geneva. Under the deal, the U.S. cut tariffs on Chinese goods from 145 percent to 30 percent, while China reduced its own from 125 percent to 10 percent. The truce was seen as a crucial opportunity to cool tensions and resume constructive dialogue. However, the fragile détente began to unravel within weeks. Today, President Trump accused China of “totally violating” the terms of the agreement, though he offered no details. U.S. Treasury Secretary confirmed that talks have stalled and suggested that direct engagement between the two presidents may be needed to break the impasse. In a separate legal development, the U.S. Court of International Trade ruled that the administration lacked the authority to impose the “Liberation Day” tariffs under emergency economic powers, declaring them unconstitutional. In response, the administration announced it would appeal and request a stay on the ruling, while maintaining its commitment to the broader trade agenda. For now, the tariffs remain in effect, and uncertainty reigns. The legal challenge, coupled with collapsing negotiations, has injected a fresh wave of volatility into global markets and complicated already-strained supply chains.
The Baltic indices have remained largely unshaken by the ongoing geopolitical turbulence, sailing through the volatility with measured indifference. Despite dramatic headlines and policy swings, spot market continues to chart a restrained course – stable, but at notably low levels. For now, the dry bulk market seems content to wait out the storm, quietly absorbing the noise while navigating through the fog of uncertainty.
Data source: Doric