The recent change of course in the trade conflict between China and the United States has direct consequences for the economic prospects of the second largest economy in the world. Several large banks have adjusted their growthrognoses down for 2025, while Beijing holds on to an ambitious purpose of “around 5 percent”.
Citi and Natixis pull the brakes
This week Citi was one of the first major players to reduce the growth forecast for China to 4.2 percent, a decrease of half a percentage point. According to the company, the chance of an agreement with Washington has decreased considerably since the final round of mutual import duties.
Natixis also came up with a similar reduction. The French investment bank also sees the Chinese economy this year also grow by 4.2 percent, which previously expected to 4.7 percent.
Tensions have risen again in recent days. President Trump announced that the American rates on Chinese goods will be increased by another 50 percent. This brings the total rate level on Chinese products to 104 percent. With an increase in his taxes on American products, Beijing responded to 34 percent and extra restrictions for American companies in China.
Goldman Sachs notes that the direct effect of these new rates is decreasing. Where the first increase of 50 percent would lower China GDP by 1.5 percentage points, a second round has a smaller effect of 0.9 percentage points. Nevertheless, the bank warns of increasing risks of further delay in growth.
Trust is crumbling
According to Hao Zhou, chief economist at Guotai Junan International, the lack of clarity is especially worrying. “The economic horizon has become cloudy,” he says. There is a fear that future American measures are difficult to predict, which makes investments and planning difficult.
At the same time, Beijing Doorsmen is willing to take additional measures to support the domestic economy, such as interest rates or increased government spending.
Not all analysts agree on the seriousness of the situation. For the time being, Morgan Stanley and Goldman Sachs are sticking to a growth of 4.5 percent, although they acknowledge that the downward risks increase. Nomura provides a decrease in Chinese exports by 2 percent, and nevertheless holds on to the same growth forecast.
The expectation is in some circles that China can still increase his counter reactions without too much economic damage, now that the direct impact of the American measures is decreasing. That would put pressure on Washington’s position of power.
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Source: https://newsbit.nl/wall-street-verlaagt-groeiverwachtingen-china-door-escalerende-handelsspanningen-met-vs/
