China's Economy Grapples with Deflation, Tariffs, and Weak Demand

Consumer inflation rises slightly in January, but deflationary pressures and U.S. tariffs weigh on economic recovery.

China's Consumer Price Index (CPI) rose 0.5% year-over-year in January, the fastest growth since August, driven by holiday spending during an earlier Lunar New Year.
Despite the rise in consumer prices, producer prices fell 2.3% in January, marking 28 consecutive months of deflation in factory-gate prices.
The Chinese economy faces a fourfold challenge: weak domestic consumption, declining industrial production, deflationary pressures, and new U.S. tariffs imposed by President Trump.
U.S. tariffs, including a 25% levy on steel and aluminum imports, threaten China's export-reliant economy, prompting Beijing to introduce retaliatory tariffs targeting American goods like coal and automobiles.
Beijing has pledged to stimulate domestic consumption through measures such as wage increases and tax incentives, but analysts remain skeptical about the effectiveness of these efforts in the short term.