Tariffs "slow" China's economic growth - Goldman Sachs lowers forecast for 2025-2026
US investment bank Goldman Sachs lowered its forecasts for China's Gross Domestic Product growth to 4% in 2025 and 3.5% in 2026, from 4.5% and 4.0% previously.
Goldman Sachs made the review for the world's No. 2 economy and the second largest supplier of American imports, after US President Donald Trump increased the tariff on Chinese imports to 125% from the 104% level a few days ago.
Although the additional tariffs are expected to have a "marginal impact on the decline," the significant increase in US tariffs on China will weigh significantly on the Chinese economy and labor market, according to Goldman.
"We anticipate that the Chinese government will further intensify policy easing, forecasting a 60 basis point cut in policy rates, up from 40 basis points previously," the report said.
Goldman added that "even these significant relief measures are unlikely to fully offset the negative effects of the tariffs."
On April 3, Fitch cut China's long-term foreign currency rating by one notch to "A" from "A+", a year after lowering its outlook on Beijing's credit rating.
The downgrade in economic growth forecasts highlights growing concerns about the long-term economic impact of ongoing trade tensions between the United States and China. With tariffs continuing to rise, especially on Chinese imports, analysts are worried about their effects on the Asian economy. Beijing has been facing challenges such as slowing domestic consumption, a weakening labor market and rising production costs.
As the world's second-largest economy, China's slowdown poses risks not only to its economic stability but also to the dynamics of world trade, due to its role as a key supplier and consumer in the global supply chain.
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