On Thursday, April 10, Goldman Sachs, the American investment bank, released a report indicating that the growth rate of China’s GDP has been revised downwards from the previous projections of 4.5% in 2025 and 4.0% in 2026 to 4% and 3.5%, citing the impact of tariffs.
According to Reuters, after U.S. President Trump raised tariffs on Chinese imports from 104% to 125%, Goldman Sachs made the aforementioned adjustments for China, the second largest economy in the world and the second largest source of imports for the United States.
Andrew Tilton and his team of strategists stated in a report, “We believe that achieving a GDP growth rate of 4.5% in China this year will be very challenging.”
They noted that while further increases in tariffs may lead to diminishing marginal effects, the significant hike in tariffs on China by the U.S. is expected to exert immense pressure on the Chinese economy and labor market. The team predicted that the Chinese government will further loosen its policies, with a projected interest rate cut of 60 basis points, up from the previous 40 basis points, and an expansion of the fiscal deficit, forecasted to rise from 10.4% of GDP in 2024 to 14.5%.
However, the report added, “Even with these significant easing measures, it is unlikely to fully offset the negative impact of tariffs.”
This revised forecast takes into consideration external adverse factors, including weakening global demand and an anticipated slowdown in economic growth outside of China, which is expected to further decrease GDP by 0.2 percentage points this year.
The strategists continued, “Recent events have highlighted President Trump’s speed in adjusting tariffs, while also underscoring the likelihood of continued high tariffs on Chinese goods.”
They emphasized that approximately 10 to 20 million Chinese workers could be affected by the impact of U.S. export products.
On April 3, Fitch downgraded China’s long-term foreign currency rating from “A+” to “A,” and a year ago, Fitch had lowered China’s credit rating outlook.
Last month, Beijing announced an economic growth target of around 5% for 2025.