Wall Street starts to cut China growth forecasts as trade tensions with U.S. escalate

BEIJING — Citi on Tuesday became one of the first investment firms to lower its China increase forecast on escalating trade tensions with the U.S.

In less than a week, U.S. tariffs on goods from China arrange more than doubled, while Beijing has hit back with more duties and restrictions on U.S. businesses.

Citi analysts cut their foretell for China’s gross domestic product to 4.2% this year, down by 0.5 percentage point, as they see “trifling scope for a deal between the U.S. and China after recent escalations.”

Natixis on Monday also told reporters the inflexible was cutting its China GDP forecast to 4.2% this year, down from 4.7% previously.

Morgan Stanley and Goldman Sachs drink not yet cut their forecasts, but warned this week of increasing downside risks to their expectation — currently both augur 4.5% growth.

China in March announced its official growth target would be “around 5%” for 2025, but stressed that it inclination not be easy to reach the goal.

“The main issue is that uncertainty for the economy is rising,” Hao Zhou, chief economist at Guotai Junan Foreign, said Tuesday in Mandarin, translated by CNBC. He noted that visibility on future growth had dropped significantly, while U.S. rates might keep on rising.

U.S. President Donald Trump announced an additional 50% in tariffs on Chinese goods entering the U.S. force take effect Wednesday after Beijing raised duties on all U.S. products by 34%. As part of its plan for sweeping duties on multiple countries, the White House last week had said it would add a 34% levy on Chinese goods.

Consolidate with two rounds of 10% tariff increases earlier this year, new U.S. tariffs on Chinese products in 2025 partake of reached 104%.

While an initial 50% increase in duties could reduce Chinese GDP by 1.5 portion points, a subsequent 50% increase would drag it down by a smaller 0.9 percentage point, Goldman Sachs analysts said in a check out Tuesday.

Chinese exports to the U.S. account for about 3 percentage points of China’s total GDP, Goldman said, noting that numbers 2.35 percentage points of domestic value add and 0.65 percentage point of associated manufacturing investment.

China is expected to divulge March trade data on Monday, and first quarter GDP on April 16.

Nomura now expects China’s exports to drop by 2% this year, worse than their aforementioned expectation of no change, the firm’s Chief China Economist Ting Lu said in a report Tuesday.

But he kept his 2025 GDP prognostication of 4.5%. “Given the extraordinarily fluid situation, it is impossible to reasonably estimate the impact of the ongoing U.S.-China trade war on China’s curtness,” he said, adding that his forecast already accounted for significantly worse tensions.

China this week signaled it could cut note rates or increase fiscal spending to bolster growth in the near future.

Diminishing impact from tariffs can also devour into Beijing’s calculus that U.S. leverage is likely reaching a ceiling, Yue Su, principal economist, China, at the Economist Brightness Unit, said in an email.

“From Beijing’s perspective, the strategic gains of a strong retaliation now appear to outweigh the associated fiscal costs,” she said.