Goldman Sachs China’s growth forecast has been revised higher after surprising US-China deals to cut each other’s tariffs. Investment banks currently expect China’s GDP growth forecast to rise by 4.6%, at 4% from its initial forecast in 2025. Currently, this development is consistent with ease of trade tensions, which could help stimulate China’s economic recovery and market confidence.
Tariff relief boosts China’s GDP, trade outlook and market confidence
Major forecast revisions
Goldman Sachs also revised China’s growth outlook from 3.5% in 2026, up 3.8%. The revision is a sign of an increase in optimism over China’s medium-term outlook, despite not yet reaching Beijing’s 5% target for 2025. Currently, the impact of tariff reductions has an immediate impact on financial markets and has a rather obvious positive meaning.
“We’re looking forward to seeing you in the future,” said Gary Ng, senior economist at Natixis.
“This contract is a temporary suspension, not a breakthrough.”
Customs contract details
The trade agreement, announced Monday, includes a temporary suspension of most tariffs, reducing the tax on goods from 125% to 10% over 90 days. This represents a significant melting in the US-China trade tensions that have attenuated economic forecasts for quite some time. China’s improved GDP forecast reflects optimism that this 90-day window could lead to a more permanent arrangement.
Several financial institutions are available for development. UBS revised its 2025 China GDP forecast from 3.4% to 3.7-4%. Meanwhile, Natixis forecasts growth of 4.5% this year, subject to further policy stimulation and additional support measures.
Market response
Chinese stocks benefit from easing trade tensions. Nomura upgraded its Chinese stock valuation to “tactical overweight” and City has raised its year-end target for the Hungsen index. The consumer goods and technology sector is expected to see the special benefits from the impact of tariff reductions.
The Eurasian Chinese director, Wang warned:
“Chinese stock market continues to face headwinds from the weak domestic foundations, including rising debt in the struggling real estate sector and local governments.”
Future outlook
The temporality of the contract creates uncertainty regarding the long-term US-China trade friction. For President Trump, who imposed tariffs as a powerful negotiating tool, fees could not fall after 90 days. This ambiguity can play a role in creating business plans and creating business funding issues in relation to the revival of the Chinese economy.
Analysts at Morgan Stanley revised their long-term expectations for China’s GDP growth of over 4.5% in the second quarter of 2025, maintaining the same force throughout the next quarter. This shows that people have greater confidence in reducing the impact of tariffs and are more confident in the long term and even towards sustainable growth.
Goldman Sachs’ predictions about China’s growth are a careful optimistic attitude towards China’s future. This reversal of the tariff freeze has temporary relief, but analysts repeat that a long-term revision to China’s economic recovery involves structural reforms. The market will be watching sharply whether the deal will translate into a broader trade trading momentum that can be added to China’s GDP forecast for the next few years.
