Finance
Wall Street starts to cut China GDP forecasts on U.S. trade tensions
Trucks line up at the container terminal in the Longtan Port area of Nanjing Port, Jiangsu province, China on the evening of April 8, 2025.
Cfoto | Future Publishing | Getty Images
BEIJING — Citi on Tuesday became one of the first investment firms to lower its China growth forecast on escalating trade tensions with the U.S.
In less than a week, U.S. tariffs on goods from China have more than doubled, while Beijing has hit back with more duties and restrictions on U.S. businesses.
Citi analysts cut their forecast for China’s gross domestic product to 4.2% this year, down by 0.5 percentage point, as they see “little scope for a deal between the U.S. and China after recent escalations.”
Natixis on Monday also told reporters the firm was cutting its China GDP forecast to 4.2% this year, down from 4.7% previously.
Morgan Stanley and Goldman Sachs have not yet cut their forecasts, but warned this week of increasing downside risks to their expectation — currently both predict 4.5% growth.
China in March announced its official growth target would be “around 5%” for 2025, but stressed that it would not be easy to reach the goal.
“The main issue is that uncertainty for the economy is rising,” Hao Zhou, chief economist at Guotai Junan International, said Tuesday in Mandarin, translated by CNBC. He noted that visibility on future growth had dropped significantly, while U.S. tariffs might keep on rising.
U.S. President Donald Trump announced an additional 50% in tariffs on Chinese goods entering the U.S. will take effect Wednesday after Beijing raised duties on all U.S. products by 34%. As part of its plan for sweeping tariffs on multiple countries, the White House last week had said it would add a 34% levy on Chinese goods.
Combined with two rounds of 10% tariff increases earlier this year, new U.S. tariffs on Chinese products in 2025 have reached 104%.
Diminishing impact from new tariffs
While an initial 50% increase in duties could reduce Chinese GDP by 1.5 percentage points, a subsequent 50% increase would drag it down by a smaller 0.9 percentage point, Goldman Sachs analysts said in a report Tuesday.
Chinese exports to the U.S. account for about 3 percentage points of China’s total GDP, Goldman said, noting that includes 2.35 percentage points of domestic value add and 0.65 percentage point of associated manufacturing investment.
China is expected to report March trade data on Monday, and first quarter GDP on April 16.
Nomura now expects China’s exports to drop by 2% this year, worse than their previous expectation of no change, the firm’s Chief China Economist Ting Lu said in a report Tuesday.
But he kept his 2025 GDP forecast of 4.5%. “Given the extraordinarily fluid situation, it is impossible to reasonably estimate the impact of the ongoing U.S.-China trade war on China’s economy,” he said, adding that his forecast already accounted for significantly worse tensions.
China this week signaled it could cut interest rates or increase fiscal spending to bolster growth in the near future.
Diminishing impact from tariffs can also feed into Beijing’s calculus that U.S. leverage is likely reaching a ceiling, Yue Su, principal economist, China, at the Economist Intelligence Unit, said in an email.
“From Beijing’s perspective, the strategic gains of a strong retaliation now appear to outweigh the associated economic costs,” she said.
People watch as Berkshire Hathaway chairman Warren Buffett is seen on a screen speaking at the Berkshire Hathaway Inc annual shareholders’ meeting, in Omaha, Nebraska, U.S., May 3, 2025.
Brendan McDermid | Reuters
Berkshire Hathaway shares are hanging on solidly Monday as investors process Warren Buffett‘s surprise announcement to step down and envision a new path for the conglomerate after his legendary 60-year run.
Buffett, 94, picked the very last moment at Berkshire’s annual meeting in Omaha, Nebraska, to tell his loyal shareholders that it’s time for Greg Abel, vice chairman of non-insurance operations, to replace him as CEO. The board voted unanimously on Sunday to make Abel president and CEO on Jan. 1, 2026, and for Buffett to remain as chairman.
Class B shares fell 2.9% in premarket trading Monday after hitting an all-time high at $539.80 Friday. Class A shares dropped 2.8% after closing at a record high at $809,350 apiece. Berkshire issued Class B shares in 1996 at a price equal to one-thirtieth of a Class A share. In 2010, Berkshire Class B shares split 50-for-1.
“Shareholders should welcome this transparent transition, but also have confidence that Warren isn’t going anywhere,” said Macrae Sykes, portfolio manager at Gabelli Funds and a Berkshire shareholder. “Retaining the position of Chairman means he can continue to mentor Greg and the Berkshire leaders, while also providing additional intellectual capacity when the inevitable time for more major capital allocation occurs.”
It marks an end of an epic era for Berkshire, which was a failing New England textile mill six decades ago when Buffett used an investment partnership he ran to take control. Berkshire has grown into a one-of-a-kind juggernaut worth nearly $1.2 trillion with businesses encompassing insurance, railroad, retail, manufacturing and energy. Buffett is handing over his reins on a particularly high note as Berkshire shares just reached a new peak Friday.
Berkshire Hathaway Class B shares
“Buffett leaves a company that is less reliant on his investing capabilities, with an array of leading businesses with strong cash flows,” Brian Meredith, UBS’ Berkshire analyst, said in a note. “Operationally, we expect little change at BRK and the culture/strategy to remain unchanged under Abel.”
The stock could also be reacting to Berkshire’s first-quarter results that showed a 14% decline in operating earnings, driven by a 48.6% plunge in insurance-underwriting profit. Berkshire said the Southern California wildfires led to a $1.1 billion loss during the period.
Berkshire shares have significantly outperformed the S&P 500, rising nearly 19% this year. Investors seeking relatively safe places to hide find Berkshire appealing because of the defensive nature of its huge insurance empire and the conglomerate’s unmatched balance sheet.
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