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Investing.com-- Bank of America analysts cut their annual gross domestic product forecast for China on Tuesday, stating that the country faces significant headwinds from a bitter trade war with the United States.
BofA cut its China GDP forecast to 4% in 2025 from 4.5%, further below the government’s 5% annual target.
The investment bank sees the greatest hit from the tariff shock coming in the second quarter, which could see GDP shrink 1.8% from the prior quarter. China’s economy grew more than expected in the first quarter, but this outperformance is expected to be largely offset by underperformance in the next three quarters.
BofA also cut China’s 2026 GDP forecast to 4.2%.
The softer outlook comes largely on the back of a bitter trade war between the U.S. and China, after U.S. President Donald Trump slapped China with 145% trade tariffs. China retaliated with a 125% tariff against the United States.
The U.S. tariffs are expected to greatly crimp China’s exports, which are a major GDP driver.
Still, BofA said that the trade conflict could push China back towards growth-centric policy, while Beijing could also be forced to open up further in trade and investment with the rest of the world.
China is also expected to dole out more stimulus measures, and could announce even more measures to boost household consumption. BofA said its downgraded forecast reflected additional stimulus measures.
But BofA also warned that if Beijing unlocked stimulus a “little too late,” growth could worsen further by the fourth quarter of 2025.