China’s consumer prices fall in March as trade war reaches fever pitch

China’s consumer prices declined 0.1 per cent at a decisive moment in protracted trade conflict with US

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Domestic consumption has taken on new importance in China as the US imposes hefty tariffs on Beijing’s imports. Photo: Xinhua

Published: 9:35am, 10 Apr 2025Updated: 11:30am, 10 Apr 2025

As a wave of tariff hikes from US President Donald Trump washes on China’s shores – with a combined 125 per cent in import duties placed on all Chinese goods – Beijing has reported a drop in consumer prices while many exporters look inward to find new sources of revenue.

The national consumer price index (CPI), a key gauge of inflation, fell 0.1 per cent year on year last month, according to data released by the National Bureau of Statistics on Thursday.

That was a slightly smaller drop than the 0.12 per cent fall projected by financial data provider Wind. During the first two months of 2025, the metric saw a 0.1 per cent year-on-year decline.

But the decline reflects the continued risk posed by deflation to the Chinese economy, with the trade war likely to intensify the downward pressure on prices in the coming months as a decline in American demand leaves Chinese producers with piles of unsold inventory.

“Deflationary pressure is persistent with both CPI and PPI in negative territory,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management. “Bilateral trade between China and the US is set to drop sharply soon due to the triple digit tariffs.”

But Zhang added that the Chinese government was likely to launch a stimulus to boost domestic demand amid the escalating trade war, which could mitigate the deflationary pressure.