UBS: Tariff impact on China economy eases, growth seen at 3.7–4.0% in 2025

UBS: Tariff impact on China economy eases, growth seen at 3.7–4.0% in 2025

The recent U.S.-China trade truce has significantly impacted the Chinese economy, with UBS economists predicting a robust growth rate of 3.7% to 4.0% for 2025. This forecast reflects a notable easing of tariff pressures, which had previously threatened to stifle economic growth. The truce, which includes a 90-day pause on the harshest tariffs, has provided a much-needed respite for Chinese businesses and consumers alike [1].

The tariff reduction is expected to lower import costs, making Chinese goods more competitive in the global market. This development is particularly beneficial for sectors heavily reliant on imports, such as manufacturing and technology. The reduced tariffs are also likely to stimulate domestic demand, as consumers and businesses alike benefit from lower prices. UBS analysts highlight that the trade war had previously led to a significant slowdown in Chinese economic growth, with tariffs contributing to a decline in export volumes and increased production costs [2].

Despite the positive outlook, economists caution that the long-term sustainability of the truce remains uncertain. The 90-day pause is a temporary measure, and the ultimate resolution of the trade war will depend on the outcome of ongoing negotiations. The current agreement is seen as a step towards de-escalation rather than a comprehensive solution to the complex trade issues between the two nations. As such, investors should remain vigilant and monitor the progress of future negotiations [1].

The economic outlook for China is further supported by a rebound in global trade and investment, which has been boosted by the recent trade truce. The respite from tariffs has also helped to reduce geopolitical risks, contributing to a more stable investment environment. However, the Chinese government must continue to address internal challenges, such as the ongoing COVID-19 pandemic and the need for structural reforms, to maintain sustainable growth [2].

In conclusion, the U.S.-China trade truce has provided a much-needed boost to the Chinese economy, with UBS economists predicting robust growth in 2025. The tariff reduction is expected to lower import costs, stimulate domestic demand, and contribute to a more stable investment environment. However, the long-term sustainability of the truce remains uncertain, and investors should continue to monitor the progress of ongoing negotiations.

References:
[1] https://www.investopedia.com/trade-war-truce-leaves-30-tariff-on-china-in-place-11732864
[2] https://www.business-standard.com/world-news/wary-investors-hope-us-china-talks-will-ease-high-stakes-trade-war-125051100055_1.html