The trade war is starting to hurt the Asian nation, depressing the consumer spending that the online giant relies on to drive much of its growth.

(Bloomberg)—Alibaba Group Holding Ltd. trimmed its annual forecast after quarterly sales missed estimates, underscoring the extent to which escalating tensions with the U.S. are hurting the Chinese economy.

Alibaba Group Holdings Ltd. co-founder Jack Ma has warned that conflict between the world’s two largest economies could last 20 years, raising concerns about the toll that tensions would have on Alibaba and its core customers.

Yet the Hangzhou-based company managed to record 54% revenue growth, from 55.12 billion yuan ($8.00 billion) to 85.15 billion yuan ($12.40 billion), by adjusting its e-commerce formula and expanding into newer businesses like cloud computing. Alibaba owns and operates Taobao and Tmall, which hold the No. 1 and No. 2 spots on the Internet Retailer 2018 Online Marketplaces. It’s core commerce revenue from those and other sites grew 56% year over year, from 46.46 billion yuan ($6.75 billion) to 72.48 billion yuan ($10.55 billion).

The trade war is starting to hurt the Asian nation, depressing the consumer spending that the online giant relies on to drive much of its growth. Domestically, it’s grappling with a migration of smaller merchants to cheaper platforms such as JD.com Inc. (No. 5 in the Online Marketplaces) and Pinduoduo Inc., both backed by nemesis Tencent Holdings Ltd.

“China’s e-commerce sector will feel the drag of the economy slowdown even more next year,” said Steven Zhu, an analyst with Pacific Epoch. “Platforms like Pinduoduo are charging much lower in commissions, posing significant competition to Alibaba.”

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Heightening the uncertainty, Chinese regulators are clamping down on the country’s internet sector, reining in everything from gaming apps and travel sites to ride-hailing. That’s exacerbating already slowing growth in Alibaba’s business. The Hangzhou-based company is trying to counter that by stepping up its marketing services and investing in its own grocery stores and delivery to boost sales.

Alibaba’s closely watched customer management revenue, which includes the high-margin business of helping merchants with marketing, grew 25%—down a tad from the previous quarter’s 26%. Other divisions however remained humming—the cloud business grew 90%. Youku, its Netflix-style video service, more than doubled its average daily subscribers, while the international business—a relatively smaller piece of the pie—grew 55%.

Revenue at China’s biggest e-commerce company rose 54% to 85.15 billion yuan ($12.36 billion) in the three months ended September. That compares with the 86.5 billion-yuan ($12.55) average of estimates compiled by Bloomberg.

Shares of Alibaba gained 2.6% in pre-market trade, as stocks surged amid hopes China and the U.S. might have possible terms of a trade deal to discuss this month. Its shares have slid 12.3% this year compared with a 3.5% loss for the NYSE Composite Index.

The reduced forecast comes as Alibaba ramps up for its annual Singles’ Day shopping festival, a litmus test of not just the company’s health but also China’s overall consumption. Chinese online retail sales growth is already slowing, to 24 percent in the third quarter from 36 percent in the second.

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CEO Daniel Zhang, who succeeds Ma as chairman next year, will preside over the Nov. 11 event as it broadens the shopping categories to include purchases made in affiliated shopping malls and food deliveries.

Alibaba faces “a soft quarter ahead on weak consumption and intensifying competition,” Wendy Huang, an analyst at Macquarie, said in a report.

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