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Trucks are seen lined up at the container terminal in the Longtan Port area of Nanjing Port, Jiangsu province, China, on the evening of April 8, 2025.
BEIJING — In a significant move, Citi announced on Tuesday its decision to reduce its growth forecast for China, citing intensifying trade conflicts with the United States as a primary factor.
Recent developments have seen U.S. tariffs on Chinese imports surge to more than double, prompting retaliatory measures by Beijing targeting U.S. businesses through increased duties and restrictions. As a result, Citi analysts have revised their projection for China’s gross domestic product (GDP) to 4.2% for the current year, which reflects a 0.5 percentage point decrease. They expressed skepticism regarding the prospects for a diplomatic resolution between the U.S. and China following the recent escalations in tensions.
On Monday, Natixis also communicated to the press a similar reduction in its GDP forecast for China, adjusting it to 4.2% as well. The firm did not disclose its previous estimate.
While Morgan Stanley and Goldman Sachs have maintained their forecasts for the time being, both institutions have acknowledged increasing risks that could lead to downward adjustments. As it stands, both firms are projecting a growth rate of 4.5% for China.
Earlier in March, China had set its official GDP growth target at “around 5%” for 2025, though officials recognized that achieving this target would be challenging under the current economic climate.
Hao Zhou, chief economist at Guotai Junan International, commented that “the main issue is that uncertainty for the economy is rising,” as conveyed in Mandarin and translated by CNBC. He emphasized the significant decline in predictability regarding future growth, particularly due to the potential for escalating tariffs from the U.S.
U.S. President Donald Trump unveiled an additional 50% tariff on Chinese imports, effective Wednesday, following China’s imposition of a 34% tariff on U.S. goods. Last week, the White House announced sweeping tariffs on multiple nations, which included the significant 34% levy targeting Chinese products.
When calculated cumulatively with two earlier rounds of 10% tariff increases this year, the new U.S. tariffs on Chinese merchandise now total a staggering 104%.
Diminishing Impact from New Tariffs
According to a report published by Goldman Sachs, a 50% increase in tariffs could initially lower China’s GDP growth by as much as 1.5 percentage points. However, analysts noted that the impact of an additional 50% hike would likely be smaller, reducing GDP by approximately 0.9 percentage points.
Goldman highlighted that exports from China to the U.S. account for about 3 percentage points of the nation’s overall GDP, incorporating 2.35 percentage points of domestic value addition and 0.65 percentage points that are linked to manufacturing investments.
Upcoming trade data for March is expected to be released on Monday, with the first quarter GDP figures scheduled for April 16.
Nomura has revised its outlook for China’s exports, now forecasting a 2% decline for the year, which is a more pessimistic estimate than their previous expectations of stability. Ting Lu, Chief China Economist at Nomura, maintained a 2025 GDP estimate of 4.5%, explaining that the ongoing U.S.-China trade conflict’s impact on the economy remains challenging to predict given its fluidity.
In response to the pressures on growth, China has indicated that it may consider lowering interest rates or increasing fiscal spending to stimulate the economy in the near term.
The diminishing efficacy of tariffs may influence Beijing’s calculations regarding U.S. leverage, as Yue Su, principal economist for China at the Economist Intelligence Unit, suggested in an email. She remarked, “From Beijing’s perspective, the strategic gains of a strong retaliation now appear to outweigh the associated economic costs.”
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