#TariffsPause According to analysts at Capital Economics, Chinese consumers can theoretically absorb the shock of a collapse in exports to the United States, but only with much greater government support than policymakers currently seem willing to provide.

The firm noted that "retail sales in China are more than ten times the country's exports to the United States," indicating that a modest increase of just 4% in domestic goods consumption over two years would be necessary to offset a potential hit of 2 trillion renminbi from U.S. tariffs.

However, "this would require policymakers to increase financial transfers to households far beyond what they have announced so far."

Retail sales rose by 5.9% year-on-year in March, the highest level in 14 months, but Capital Economics warned that the gains were "largely" due to a consumer goods replacement plan.

The firm stated: "While it can have a significant impact on consumption composition, it only increases households' purchasing power by the amount of the subsidies themselves," adding that this year's 300 billion renminbi replacement incentives represent only 0.2% of GDP.

The company noted that real income growth fell in the first quarter, and without larger financial transfers, it sees little chance for recovery.