China's Economy Grows Faster Than U.S. Amid Tariffs, Deficits Shrink

China's economy has continued to exceed growth expectations despite elevated tariffs between China and the United States. China's export business with countries outside the United States also appears to have expanded. President Trump had warned that China faced "big trouble" unless China accepted what Trump called a "two-way street" in trade. Trump announced the tariff plan 18 months ago with the stated expectation that foreign exporters, rather than U.S. consumers, would absorb the additional costs.

Goldman Sachs's Hui Shan said over the weekend that China's third-quarter real GDP rose 4.5% year-on-year, compared with a consensus forecast of 4.4%. Shan said September economic activity exceeded expectations. Shan said industrial production growth accelerated to 5.5% year-on-year. Shan said retail sales also surpassed expectations. Shan assessed that the growth target of 4.5% to 5% appeared achievable.

The Bureau of Economic Analysis put U.S. GDP growth at 2.5% in the first quarter. The Bureau of Economic Analysis reported second-quarter growth of 2.2%. U.S. policymakers are advocating economic growth as a way to ease fiscal pressures associated with the country's $40 trillion national debt. However, the United States remains the world's largest economy. The International Monetary Fund puts China's GDP per capita at $15,370. The IMF puts U.S. GDP per capita above $95,000.

Shan said China's fiscal data showed effective tightening, contrary to the moderate fiscal loosening Shan had expected at the beginning of the year. Shan said combined general public budget and government-managed fund revenues rose 1.4% year-on-year during this year's first nine months. Shan said expenditures fell 3.5% year-on-year over the same period. Shan estimated that the augmented fiscal deficit narrowed from 11% of GDP in December 2025 to 9.4% in September 2026, measured on a 12-month moving average.

China appears to be reducing the budget deficit relative to GDP. However, the United States starts from a smaller deficit relative to GDP. U.S. policymakers have not yet agreed on targets for reducing deficits as a share of GDP. The Congressional Budget Office projects that total U.S. deficits will average 7.2% of GDP over the next three decades, from 2026 to 2056. Shan expects a substantially looser fiscal stance in the fourth quarter following recent policy announcements. Nevertheless, Shan lowered the full-year 2026 augmented fiscal deficit estimate from 11.5% to 10.0% of GDP.

Tariffs reportedly apply to 100% of U.S. exports to China. U.S. tariffs reportedly cover 88.8% of China's exports to the United States. Effective tariff rates have declined from the trade war peaks but remain substantially above levels of earlier years. The Peterson Institute for International Economics puts China's tariff rate on U.S. exports at 31.9% as of August 2026. The institute puts the U.S. tariff rate on imports from China at 35.2%.

Data that China's government released earlier this month showed exports increasing 36.3% year-on-year in September, the fastest growth since February. Census Bureau data suggest U.S. imports from China remain below 2024 levels, before the tariffs were introduced. However, imports have been rising again since the February 2026 low.