Goldman Sachs expects significant Chinese fiscal easing to offset tariffs

BEIJING – Goldman Sachs said it expects Chinese policymakers to accelerate fiscal-easing measures significantly to offset the drag on growth from higher tariffs announced by the United States last week that were higher than expected.

Goldman said in a report on April 6 that the new tariff rates announced by US President Donald Trump would lower Chinese GDP growth by at least 0.7 percentage point in 2025.

“Prior to the tariffs, growth was tracking above our forecasts, and we were contemplating an upward revision to our 2025 GDP expectations,” the report said.

Goldman pointed to a commentary in China’s state-run People’s Daily on April 6 that hinted at monetary policy actions and listed measures China could take.

“Based on the evolving situation, there is ample room for adjustment in monetary policy tools such as reserve requirement ratio cuts and interest rate reductions, which can be introduced at any time,” the newspaper said.

The People’s Daily also pointed to a possible further expansion of fiscal deficits, special bonds and special treasury bonds.

China will take “extraordinary measures” to boost domestic consumption, accelerate implementation of established policies, and introduce a batch of reserve policies, it said.

Goldman said in a separate report, also released on April 6, that it kept its 2025 GDP growth forecast for China at 4.5 per cent due to better-than-expected first-quarter data and increased policy easing expectations, but trimmed its earnings growth forecast for the year to 7 per cent from 9 per cent.

Mr Trump introduced an additional 34 per cent tariff on Chinese goods as part of steep levies imposed on most US trade partners, bringing the total duties on China this year to 54 per cent. China retaliated with a series of countermeasures.

The investment bank also downgraded Taiwan to underweight in its Asian market