If the global economy were a massive ship, 2026 may see it navigating through unprecedented "trade headwinds." The shift in U.S. tariff policy has effectively erected multiple barriers along international trade routes, significantly altering global economic trajectories. As a major participant in world trade, China's ability to identify new growth opportunities amid adversity will be crucial for its macroeconomic management in the coming period.
I. Global Trade: A Gathering Storm
World Trade Organization (WTO) data indicates a sharp deterioration in global trade conditions. With U.S. protectionism on the rise, average import tariffs are projected to surge to 19.5% in 2026 from just 2.4% in 2024. This policy shift carries profound implications for global commerce.
While 2025 may see a 2.4% year-on-year increase in global merchandise exports—fueled by front-loading effects and AI-driven semiconductor demand—2026 is expected to reveal the full impact of U.S. tariffs, with imports likely declining by 2.3%.
The U.S. may grant tariff exemptions for certain inflation-sensitive goods, as seen with beef imports in November 2025. However, strategic sectors like semiconductors and pharmaceuticals face likely additional duties, exacerbating global trade uncertainty.
Trade data reveals stark contrasts: after August 2025 tariff hikes, U.S. imports fell 3.7% and 5.9% in August and September respectively, reversing an 11.5% growth trend from January-July. As inventory cycles turn and AI-related trade momentum fades, 2026 global export growth may slow to 0.5%, nearing stagnation.
II. China's Export Sector: Navigating Rough Waters
As the world's largest goods trader, China's exports remain tightly coupled with global trade dynamics. Current U.S. tariffs on Chinese goods stand at 31.4%, up sharply from 11.4% in 2024. From April-November 2025, China's U.S.-bound exports plummeted 26.0%, demonstrating tangible trade friction impacts.
Non-U.S. markets showed resilience, with China's exports to the EU and Belt Road economies growing 10.9% from April-October 2025. However, narrowing yuan depreciation potential and high base effects suggest this growth will moderate significantly in 2026.
Overall, China's export growth may decelerate from 5.0% in 2025 to 1.0% in 2026, with negative growth remaining possible. Facing these external pressures, China must urgently cultivate new economic drivers.
III. Domestic Demand: The Stabilizing Anchor
The 2025 Central Economic Work Conference identified "insufficient domestic demand" as China's primary economic challenge. Retail sales grew 4.0% January-November 2025 (full-year estimate: 3.9%), recovering but still half of pre-pandemic levels. Consumer confidence has remained below the 100 neutral mark since 2022, averaging 88.4 in 2025 versus 121.8 during 2019-2021, with property value declines being a key depressant.
Private investment has declined for three consecutive years, dragged down by real estate (comprising 80% of private investment). The 2025 downturn intensified as trade tensions further dampened manufacturing investment sentiment. Thus, property market adjustments remain central to weak domestic demand and disinflationary pressures.
IV. Property Markets: Seeking Stabilization
China's property downturn has persisted for over 4.5 years since mid-2021—longer than previous cycles. Despite cumulative mortgage rate cuts of 2.5 percentage points (matching 2008-09 and 2015-16 reductions), the slide continues. The core issue lies in disinflation: with 2025 GDP deflator down 1.1%, real mortgage rates have risen to 4.2% from 1.2% in 2021—historically high compared to negative rates during past recoveries.
Market stabilization requires either deeper nominal rate cuts (via targeted reductions or fiscal subsidies) or successful inflation revival through countercyclical measures. 2026 policy will likely maintain dual tracks: stabilizing markets while promoting high-quality development. Given ongoing economic transformation, aggressive property stimulus appears unlikely, suggesting continued gradual adjustment.
V. Policy Outlook: Stability Remains Paramount
Confronting trade headwinds and domestic demand weakness, China's 2026 macro policy will prioritize stability. Fiscal policy will likely remain expansionary, focusing on infrastructure, innovation, and social welfare. Monetary policy should maintain ample liquidity with flexible rate adjustments to reduce financing costs.
Structural reforms will continue to optimize business environments and stimulate market vitality. Property market stabilization remains crucial, with policies supporting genuine housing demand while developing rental markets. Despite dual pressures from external shocks and internal restructuring, China's economy can achieve stable growth through persistent reforms and domestic demand expansion.