Goldman Sachs Predicts Fiscal Easing in China Amid Tariff Tensions

Goldman Sachs forecasts that Chinese policymakers will ramp up fiscal easing to counteract the economic impact of increased U.S. tariffs. The tariffs are expected to lower China's GDP growth by 0.7 percentage points in 2023, spurring China to deploy monetary and fiscal measures to sustain growth.

Goldman Sachs anticipates that China's government will significantly boost fiscal easing efforts in response to heightened U.S. tariffs, which have surpassed initial expectations. This development follows American President Donald Trump's announcement last week, which threatens to reduce China's GDP growth by at least 0.7 percentage point in the current year.

Before the tariff increase, Goldman had observed a favorable trajectory in growth, prompting a possible upward adjustment to its 2025 GDP forecasts. According to China's state-run People's Daily, there are several monetary policy tools available, such as cuts to reserve requirement ratios and interest rate reductions, highlighting the government's readiness to respond.

Additionally, China might expand fiscal deficits and issue special bonds to enhance domestic consumption and maintain economic momentum. Despite these measures, Goldman has adjusted its earnings growth expectations for China to 7% from 9% for the year, reflecting the ongoing trade tensions.

(With inputs from agencies.)