Research Briefing
14 May 2025
China’s stimulus will provide partial offset to trade war drag
We expect the peak economic drag for China from the exogenous demand shock generated by higher tariffs to occur in Q2 and Q3 this year.
US tariffs on its imports from China remain prohibitively high, so we’ve kept our GDP growth forecasts for China at 4.1% in 2025 and 3.9% in 2026. We expect the peak economic drag from the exogenous demand shock generated by higher tariffs will occur in Q2 and Q3 this year.
What you will learn:
- As it stands, we estimate that the US effective rate on its imports from China has risen to just slightly over 100%, up from 11% in January. Meanwhile, the effective tariff rate on China’s imports from the US has risen to 145% from 17% previously.
- US-China trade talks could eventually result in a rollback of tariffs to still-high double-digit rates, but we think such a scenario would only drive modest upside to our 4.1% growth forecast for this year.
- A meaningful de-escalation would also encourage Chinese policymakers to respond with more careful stimulus, keeping risks to our growth forecasts broadly balanced.
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