Goldman Sachs Warns: Trump Tariffs May Cut China's 2025 GDP Growth by 0.7%

Goldman Sachs, a leading financial services firm, has predicted that China may implement monetary easing measures to counteract the economic impact of tariffs imposed by U.S. President Donald Trump. The investment banking giant anticipates that Trump's tariff policies could reduce China's GDP growth by at least 0.7 percentage points in 2025. This forecast follows Trump's recent executive order, which imposed a 10% tariff on all imported goods entering the U.S., with additional country-specific duties resulting in a cumulative 54% tariff on Chinese imports. In response, China has implemented retaliatory tariffs, and Trump has threatened further duty hikes if China does not withdraw its tariffs by a specified deadline.

According to Goldman Sachs' analysis, prior to the imposition of these tariffs, China's economic growth was tracking above their forecasts, suggesting potential for an upward revision to their 2025 GDP expectations. However, the evolving trade situation has created ample room for adjustments in monetary policy tools, such as cuts to the reserve requirement ratio and reductions in interest rates. These measures can be introduced at any time to support the economy.

The escalating trade tensions between the U.S. and China have led to a volatile economic environment. Trump's threats of additional tariffs and China's retaliatory measures have created uncertainty in global markets. Goldman Sachs' forecast indicates that a recession has become more likely, even if Trump were to backtrack on his tariff policies. The financial firm has also warned about the potential impact on China's stock market as the tariffs take effect.

The situation underscores the complex interplay between trade policies and economic growth. China's potential easing of monetary policy is a strategic move to counteract the negative effects of the tariffs on its economy. The use of tools such as reserve requirement ratio cuts and interest rate reductions can provide the necessary stimulus to maintain economic stability. However, the effectiveness of these measures will depend on the broader economic conditions and the ongoing trade negotiations between the U.S. and China.