Goldman Sachs Predicts Increased Chinese Fiscal Stimulus Amid US Tariff Hikes

Goldman Sachs anticipates that Chinese authorities will significantly enhance fiscal stimulus measures in response to newly imposed tariffs by the United States, which were higher than market expectations. The investment bank indicated in a report that the recent tariffs announced by President Donald Trump could potentially reduce China's GDP growth by at least 0.7 percentage points in 2025.

Before the announcement of these tariffs, China's growth was performing better than previously forecasted, leading Goldman Sachs to consider revising its GDP expectations for the year upward. The report noted that insights from China's state-run media, particularly the People's Daily, suggested potential monetary policy adjustments, including cuts to reserve requirements and interest rates.

The commentary from the People's Daily also indicated possibilities for expanding fiscal deficits and issuing special bonds to bolster economic activity. The publication emphasized that China would implement "extraordinary measures" to stimulate domestic consumption, speed up policy execution, and introduce additional reserve policies.

Goldman Sachs has maintained its GDP growth forecast for China at 4.5% for 2025, supported by better-than-expected economic data from the first quarter and increasing expectations for policy easing. However, it has lowered its earnings growth forecast for the same year from 9% to 7%.

In a related development, President Trump announced an additional 34% tariff on various Chinese goods, raising the total duties on imports from China to 54% for the year. This has prompted China to retaliate with a series of countermeasures, reflecting the escalating trade tensions between the two countries.

Furthermore, Goldman Sachs has downgraded Taiwan to an underweight position in its Asian market allocations, citing the region's high dependence on U.S. exports and its sensitivity to market fluctuations.