Goldman Sachs Forecasts Economic Relief from China Amid Escalating U.S. Tariffs

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Goldman Sachs expects Chinese policymakers to speed up fiscal easing measures to counter the economic slowdown caused by higher-than-expected tariffs imposed by the U.S. last week. The investment bank forecasts that these new tariffs will reduce China’s GDP growth by at least 0.7 percentage points this year. 

In a report released on Sunday, Goldman noted that before the tariff announcement, China's growth was outperforming expectations, and they were even considering raising their 2025 GDP forecast. However, they have now lowered their earnings growth projection for the year from 9% to 7%. 

Goldman maintained its 2025 GDP growth forecast for China at 4.5%, supported by better-than-expected first-quarter data and expectations of increased policy easing. However, the bank downgraded Taiwan to underweight due to its high exposure to U.S. exports and market sensitivity.

In response to the new tariffs, the U.S. imposed an additional 34% duty on Chinese goods, bringing the total duties on China to 54% for the year. China retaliated with its own measures, including imposing 34% tariffs on all U.S. goods and restricting exports of certain rare earth minerals. 

As fears of a global trade war intensified, Asian stock markets fell sharply on Monday, with Wall Street futures also dropping. Investors are increasingly speculating that the risk of a recession could lead to a U.S. interest rate cut as early as May.

Paraphrasing text from "Reuters" all rights reserved by the original author