China’s Growth Meets Tariff Threats, Gold Rallies on Fed Optimism

China’s 5% growth target and gold’s recent rally highlight the interplay between economic recovery efforts and emerging challenges. While China’s late-year stimulus and strong exports drove momentum, looming tariffs and deflationary pressures pose significant risks. Meanwhile, gold’s surge above $2,700 reflects market optimism around potential Federal Reserve rate cuts, as easing inflation and a weaker dollar bolster demand. These developments underscore the complex dynamics shaping global markets in 2025.

China’s economy grew by 5% in 2024, meeting its official target, as a late-year stimulus push and record-high exports drove growth, according to Bloomberg. GDP growth accelerated to 5.4% in the fourth quarter, with retail sales rising 3.7% in December and industrial production seeing its fastest expansion since April.
However, significant challenges loom. Donald Trump’s proposed tariffs of up to 60% on Chinese goods could undermine exports, a key driver of growth. Additionally, property investment fell 10.6%—its worst performance on record—while persistent deflation and weak domestic demand weigh on the outlook.
Bloomberg highlights that government stimulus focused on boosting consumption and manufacturing investment played a critical role in the rebound, with further measures expected in 2025 to counter external pressures and sustain economic momentum.

Gold soared to over $2,700 an ounce, the highest in a month, following softer-than-expected US inflation data. The core consumer price index rose just 0.2%, fueling optimism that the Federal Reserve may cut interest rates by July.
The decline in Treasury yields and a weaker dollar boosted gold’s appeal as a non-yielding asset. While Fed officials remain cautious about fully declaring victory over inflation, the prospect of monetary easing has renewed momentum for gold, which rallied to record highs last year. Other precious metals, including silver and platinum, also posted gains.

China is heading for its longest stretch of deflation since the 1960s, with price declines expected to persist into 2025, according to Bloomberg. Economists highlight a negative GDP deflator for the third consecutive year, driven by weak domestic demand, a housing crisis, and falling manufacturing profitability.
Despite achieving 5% GDP growth in 2024, analysts warn that deflationary pressures, exacerbated by a potential US-China trade war under Donald Trump, could undermine the economy. Calls for aggressive fiscal and monetary stimulus are growing, with experts urging Beijing to adopt inflation targets and focus on boosting consumption to break the cycle of declining prices and weak economic momentum.

Gold prices remained firm at $2,715.21 per ounce on Friday, poised for a third consecutive weekly gain, as US data bolstered expectations of Federal Reserve rate cuts in 2025. Spot gold has gained about 1% this week, supported by easing inflation and lower Treasury yields.
Fed officials, including Governor Christopher Waller, hinted at the possibility of multiple rate cuts this year if economic conditions weaken further. However, concerns over the potential inflationary effects of incoming tariffs under Donald Trump’s administration linger.
Should bullish momentum persist, traders may monitor resistance levels at 2750.00, 2774.54, and 2833.39, while 2665.13, 2638.14, and 2583.21 could serve as potential downside targets in the event of a reversal.

The interplay between China’s growth momentum, deflationary risks, and looming trade tensions highlights the fragility of the global economic recovery. While stimulus efforts and export-driven gains have buoyed China, persistent structural challenges remain. Meanwhile, gold’s rally reflects market optimism about monetary easing, yet concerns over inflationary pressures from new tariffs add complexity. As 2025 unfolds, these dynamics underscore the need for strategic responses to navigate a highly volatile economic landscape.