Goldman seems to have the right order of magnitude. Back of the envelope scribbling shows that fully 1/3 of the $900 billion USD equivalent growth (5% on ~$18 trillion) that the Chinese government is targeting could be lost to the virtual embargo on exports to the U.S. that 145% tariffs create, giving 3.33% growth as the starting point.
Raising the question: What is the Marginal Productivity of Debt in China? How much bang for the buck, so to speak, will they get out of the upcoming stimulus? The last time I looked the U.S. requires $2 in deficit spending (stimulus) to generate $1 in GDP growth. So, whither China?
From MacroBusiness, Australia, April 11:
How screwed is iron ore?
SGX and rebar futures have firmed a little.
The Chinese ferrous PPI is weak, down 0.5% in April and 10% year on year. This will intensify as tariffs land.
Goldman has downgraded China.
On April 9th, President Trump announced a further increase in the tariff rate on imports from China to 125%, following the Chinese government’s increase of tariffs on US goods to 84%.
Although additional tariff increases are likely to have a diminishing marginal impact, the substantial rise in US tariffs on China is expected to significantly weigh on the Chinese economy and labor market.
We anticipate the Chinese government will further intensify policy easing, projecting 60bp of policy rate cuts (vs. 40bp previously) and a 4.1pp expansion in our estimate of the “augmented fiscal deficit” this year (14.5% of GDP, up from 10.4% in 2024).
However, even these significant easing measures are unlikely to fully offset the negative effects of the tariffs.
We are revising our real GDP growth forecasts for 2025 and 2026 downward to 4.0% and 3.5%, respectively, from our previous projections of 4.5% and 4.0%....
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