The trucks line up at a container terminal in the Long Tang Port area of Nanjing Port in Jiangsu Province, China, on the evening of April 8, 2025.
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BEIJING – City on Tuesday became one of the first investment companies to lower China’s growth forecasts as trade tensions escalated with the US
Less than a week later, US tariffs on goods from China have more than doubled, but Beijing has fought back with more obligations and restrictions on US businesses.
Citi analysts have seen China’s gross domestic product forecasts fall by 0.5 percentage points this year, with “there are little scope of US-China trading after the recent escalation.”
Natixis told reporters Monday that the company has cut China’s GDP forecast to 4.2% from 4.7% earlier this year.
Morgan Stanley and Goldman Sachs have yet to cut their forecasts, but this week they warned about an increased negative risk to their expectations.
China announced in March that its official growth target for 2025 would be “about 5%,” but emphasized that reaching the target is not easy.
“The main problem is the growing economic uncertainty,” said Hao Zhou, chief economist at Guotai Junan International, who said CNBC translated on Mandarin on Tuesday. He noted that although visibility for future growth has dropped significantly, US tariffs may continue to rise.
US President Donald Trump announced that an additional 50% of tariffs on Chinese goods entering the United States will come into effect Wednesday after an increase in duties for all US products by 34%. As part of its plan to wipe out tariffs in multiple countries, the White House said last week it would add 34% collection to Chinese products.
Combined with two rounds of 10% tariffs earlier this year, the new US tariffs on Chinese products in 2025 reached 104%.
Reduced impact from new tariffs
An increase in the initial 50% job could potentially reduce China’s GDP by 1.5 percentage points, but the subsequent 50% increase would reduce 0.9 percentage points.
China’s exports to the US account for about 3% of China’s total GDP, Goldman said it includes 2.35% points of domestic value and 0.65% points of related manufacturing investments.
China will report marching trade data on Monday and report its first quarter GDP on April 16th.
Nomura expects China’s exports to fall by 2% this year. This is worse than expected of previous changes, the company’s chief Chinese economist Ting Lu said in a report Tuesday.
However, he kept his 2025 GDP forecast at 4.5%. “Given the very fluid situation, it is impossible to reasonably estimate the impact of the US-China trade war on the Chinese economy,” he said, adding that his forecast already explains the tensions have deteriorated significantly.
This week, China has shown that it could potentially cut interest rates and increase fiscal spending to strengthen growth in the near future.
The reduction in the impact of tariffs could also supply Beijing’s calculations that US leverage is likely to reach the ceiling.
“From a Beijing perspective, the strategic benefits of strong retaliation seem to be outweighing the associated economic costs,” she said.
