Global investment banks are lowering their projections for China's economic growth this year as U.S. President Donald Trump's aggressive tariffs are expected to take a toll on the world's second-largest economy.
Some of the banks had upgraded their forecasts for China just a month ago, encouraged by signs of improvement in the sputtering economy in the first two months of the year.
Sino-U.S. trade tensions have intensified after Trump announced reciprocal tariffs on April 2, leading to tit-for-tat duties on each other's goods. By April 11, China was all but under a U.S. trade embargo as tariffs rose to 145%.
Gross domestic product growth in the first quarter is forecast at 5.1% year-on-year, while full-year expansion is predicted to hit 4.5% in 2025, compared with last year's 5.0% pace, according to a Reuters poll, falling short of the official target of around 5.0%.
China is due to release its first-quarter GDP data and activity indicators on Wednesday.
Here is a summary of some forecasts for the China's GDP.
** In the previous factbox, some of the institutions raised their GDP forecast for this year following some early signs of economic recovery.
KEY QUOTES:
** UBS
"Under our current new baseline assumptions, we estimate tariff hikes this year to pose a more than two-percentage-point drag on China's GDP growth. We expect China's exports to the U.S. to fall by 2/3 in the coming quarters and its overall exports to fall by 10% in USD terms in 2025, the latter also takes into account slower U.S. and global growth.
While tariff exemptions will likely reduce the inflationary pressure somewhat in the U.S., we expect they are unlikely to affect importers' desire to find alternatives to imports from China. Therefore, we expect continued negative impact of the tariff hikes on China's exports in 2026."
** CITI
"We see little scope for a deal between the U.S. and China after recent escalations.
Domestic policies could focus more on demand expansion. We expect additional funding of 1 to 1.5 trillion yuan ($205 billion) while policy implementation accelerates. The People's Bank of China (PBOC) could cut policy rates by 40 basis points and reserve requirement ratio (RRR) by 100 basis points. Policy constraints such as the exchange rate and debt management could stay, however. With prolonged elevated uncertainties, policymakers could choose to keep more powder dry."
** GOLDMAN SACHS
"Recent events have underscored the speed with which President Trump can alter tariff rates, while also highlighting the likelihood that high tariffs on Chinese goods will persist.
We estimate that 10 to 20 million workers in China may be exposed to U.S.-bound exports. The combination of extremely high U.S. tariffs, sharply declining exports to the U.S., and a slowing global economy is expected to generate substantial pressures on the Chinese economy and labor market."
** MORGAN STANLEY
"Policymakers are likely to front-load the 2 trillion yuan stimulus package announced at the National People's Congress (NPC) in the second quarter. Possible measures include modest monetary easing, front-loaded issuance and deployment of local construction bonds, a ramp-up of the consumer goods trade-in program, launch of national fertility subsidies, and faster housing inventory digestion.
With the bulk of the NPC budget being rolled out, Beijing could introduce a 1-1.5 trillion yuan supplementary fiscal package in the second half of 2025. This could include expanded quotas for trade-in subsidies, targeted support for services consumption, and enhanced infrastructure and tech investment support. Altogether, we expect the policy stimulus to translate into an additional 60-basis-point boost to growth."
($1 = 7.3052 Chinese yuan)
