U.S. Tariffs on China Trigger Economic Warning from Goldman Sachs
U.S. tariffs on China are once again shaking the global economy. On April 10, 2025, investment giant Goldman Sachs cut its growth forecast for China, blaming the growing impact of U.S. trade barriers. The bank now expects China’s GDP to grow by just 4% in 2025 and 3.5% in 2026—down from earlier estimates of 4.5% and 4%.
The downgrade comes after U.S. President Donald Trump sharply raised tariffs on Chinese imports—from 104% to a staggering 125%. This increase is one of the largest tariff hikes in recent history and is expected to weigh heavily on China’s already vulnerable economy.
The Growing Cost of the U.S. Tariffs on China
This move by the U.S. is part of a long-running trade battle. The Trump administration claims the tariffs are needed to protect American jobs and industries from what it calls “unfair” Chinese trade practices. But critics say the move could backfire, increasing costs for U.S. consumers and hurting global growth.
For China, the impact is already visible. Manufacturing output has slowed. Factory orders have dropped. Export volumes are shrinking. And as demand dips, job losses are beginning to mount in China’s industrial zones.
“China, as the second-largest provider of U.S. imports, faces mounting pressure from these trade barriers,” the Goldman Sachs report stated. The report also noted that while future tariff hikes might have a reduced impact, the current rate hike alone is enough to drag down economic growth in the near term.
Also Read: Trade Wars + Recession = Oil Crash? Goldman Warns Market Shift
What’s China Doing in Response?
In response to these growing challenges, Beijing is expected to step up support for its economy. Goldman Sachs has revised its forecast for policy rate cuts from 40 basis points to 60. That means the Chinese central bank will likely lower interest rates to stimulate borrowing, investment, and consumer spending.
Besides cutting rates, China may also introduce stimulus packages—similar to those launched during the COVID-19 crisis. These could include:
- Tax rebates for small businesses
- Subsidies for electric vehicles and green tech
- Increased infrastructure spending
- Cash incentives for consumer purchases
However, Goldman Sachs cautions that even bold action may not fully offset the damage. “Even these significant easing measures are unlikely to fully offset the negative effects of the tariffs,” the report said.
A Credit Downgrade Adds to China’s Woes
As if the tariffs weren’t enough, China also suffered a credit rating downgrade from Fitch on April 3. The agency lowered China’s long-term foreign currency rating from “A+” to “A.” Fitch cited rising fiscal risks and ongoing concerns in China’s property market as reasons for the downgrade.
This downgrade adds pressure on China’s ability to attract foreign investment and raises the cost of borrowing from international markets. It also highlights deeper structural problems that predate the current tariff war.
Also Read: Goldman Sachs Shock Warning: 35% Recession Risk as Trump Tariffs Threaten US Economy
What This Means for the World
The economic tug-of-war between the U.S. and China is affecting more than just these two countries. Global markets are increasingly nervous, especially in Asia and Europe. Supply chains remain fragile, and uncertainty about future trade flows is slowing business investments worldwide.
Emerging economies that rely on Chinese demand are also at risk. Commodity-exporting nations like Brazil, South Africa, and Indonesia may see reduced income as China’s industrial demand weakens.
Investors and governments alike are watching China’s next steps closely. Any miscalculation could trigger financial volatility and widen the rift between the world’s two biggest economies.
Also Read: China Seeks Allies to Counter U.S. Tariffs in Bid to Pressure Washington
