China defies Trump’s trade war by setting ambitious 5% growth target, vows to ‘prevail over any difficulty’

By Simone McCarthy and Nectar Gan, CNN, Mar.5: China has set an ambitious target of “around 5%” growth for 2025, in a defiant show of confidence as it braces for the fallout from escalating American tariffs on its export-driven economy.

The target “underscores our resolve to meet difficulties head-on and strive hard to deliver,” Premier Li Qiang, China’s No. 2 official, said on Wednesday as he delivered the government work report at the opening session of the National People’s Congress (NPC), the country’s rubber-stamp legislature.

Li gave his state-of-the-union-like speech shortly before US President Donald Trump began his first address to Congress in his second term, a split-screen moment between the two great power rivals, with both leaders laying out what they see as the best way forward to make their countries great again.

Under the leadership of Xi Jinping and “with the dedicated efforts of our people across the country, we can prevail over any difficulty in pursuing development,” Li said to a big round of applause inside the cavernous Great Hall of the People in Beijing.

“The giant ship of China’s economy will continue to cleave the waves and sail steadily toward the future,” he added.

Beijing’s ambitious growth target reflects an effort to project confidence in its ability to stay the course, despite mounting trade pressure from the world’s largest economy and its mercurial president.

As thousands of Chinese delegates convened in Beijing this week, Trump escalated his trade war, doubling tariffs on all Chinese imports to 20%. This came just days after his administration threatened to tighten controls to keep American technology from funding China’s own tech ambitions.

Beijing swiftly hit back with retaliatory measures by imposing tariffs of up to 15% on selected American goods, expanding export controls to a dozen US firms and filing a complaint at the World Trade Organization. It also suspended imports of US logs and soybeans from three American companies.

Accompanying China’s countermeasures was a stern warning to Washington: “If the US insists on waging a tariff war, trade war, or any other kind of war, China will fight till the end,” a spokesperson for the Chinese Foreign Ministry declared on Tuesday.

Despite Beijing’s defiant tone, the increased tariffs, and the looming threat of tighter US economic and tech restrictions, have cast a long shadow over China’s slowing economy and its ambition to become a technological powerhouse. Li nodded to the challenges in his speech, noting the increasing tariff barriers and rising geopolitical tensions.

“The external environment is becoming more complex and severe, which may have a greater impact on the country’s trade, science and technology and other fields,” he said.

Li also acknowledged the myriad problems facing the Chinese economy at home, including insufficient demand and sluggish consumption. The world’s second-largest economy is grappling with a property sector crisis, soaring local government debt, cratering foreign investment, and high youth unemployment.

In a notable move, China raised its budget deficit to around 4% of gross domestic product, the highest level in decades, in an effort to ramp up spending to counter the impact of US tariffs. It also lowered its annual inflation target to around 2% from the longstanding goal of 3%, in an acknowledgement of the deflationary pressures facing the economy.

High-tech ambitions

Even as its economy struggles, China has remained more committed than ever to its ambition to become an innovative powerhouse and self-sufficient in high tech.

“We will foster emerging industries and industries of the future,” Li said in his speech, vowing to establish a mechanism to increase funding for industries such as bio-manufacturing, quantum technology, embodied AI and 6G technology.

He also pledged to support the “extensive application of large-scale AI models” and to develop “smart manufacturing equipment,” including AI-powered new-energy vehicles and robots.

Chinese leaders see high-end chips, quantum computing, robotics and AI as critical to powering economic growth and upgrading Chinese manufacturing. The government earmarked an annual budget of 398 billion yuan ($54.7 billion) for science and technology expenditures for 2025, an increase of 10% from last year.

China entered this year’s ongoing “two sessions” political meetings buoyed by a surge of confidence and national pride in its tech sector.

Earlier this year, privately owned Chinese AI firm DeepSeek stunned Silicon Valley with the breakout success of its latest open-source large language model. Adding to that milestone: Beijing’s long-term plans for achieving global dominance in green technologies have borne fruit, with its top electric vehicle maker rivaling Elon Musk’s Tesla.

But their impact on the broader economy is limited and hasn’t been enough to offset the challenges, including Trump’s rising tariffs.

Wang Yiwei, director of the Institute of International Relations at Renmin University of China in Beijing, said the “real objective” of Trump’s tariffs war was to undermine China’s status as the “world’s factory.”

“Many low-end, labor-intensive manufacturing factories in China are already struggling because their profit margins are thin. A 10% tariff hike will force them to relocate to countries like Vietnam or other neighboring regions, accelerating the hollowing out of China’s manufacturing industry,” he said.

Such industries employ a significant portion of China’s workforce, and their decline could pose a major risk to social stability, he warned.

On Wednesday, China also unveiled its 2025 military budget, which will increase by 7.2% to 1.78 trillion yuan ($245 billion), keeping pace with recent years. China has not reported double-digit growth in military spending since 2015.

This story has been updated with additional information. CNN’s Yong Xiong and Hassan Tayir contributed reporting.