China Defies Trump Tariffs as Goldman Sachs Predicts 6% Growth Surge

TOKYO, Japan: As American households brace for the inflationary impact of renewed trade barriers, Chinese exporters continue to defy expectations, with mainland exports projected to expand 8% this year despite US tariffs that briefly exceeded 100% before settling at 30%. The resilience of China's $19 trillion economy has confounded critics and prompted Goldman Sachs to revise its growth forecasts upward.

China is now projected to grow by 5% this year, outpacing many developed economies while navigating a complex geopolitical landscape. The strategic patience of Chinese leader Xi Jinping appears to be paying dividends, with Beijing securing another year's delay on the economic confrontation initiated by the Trump administration. This breathing room allows China to strengthen trade ties with Europe, Southeast Asia and the Global South while Washington's tariffs risk boomeranging on American consumers through higher prices.

Goldman Sachs economists Andrew Tilton and Hui Shan project China could achieve growth as high as 6% in 2026 and maintain that momentum for "the next few years." Their optimism stems from China's "determination to advance the competitiveness of manufacturing and boost exports," they wrote in a recent report. The investment bank's analysis suggests China's property downturn, now entering its fifth year, is beginning to ebb, with new housing starts 75% below peak levels and property investment down 50%.

"Even if the rate of decline remains the same, the impact of the property market's downturn on the economy should become smaller in the next few years," Tilton and Shan argue. Morgan Stanley's chief global economist Seth Carpenter forecasts 5% growth for China in 2026, supported by front-loaded government policy, though he expects a moderation to 4.5% in 2027 as fiscal stimulus wanes.

The ripple effects extend globally. Oxford Economics notes that China's impressive performance has been "the cause of downside surprise for Germany," with Europe's largest economy struggling with structurally uncompetitive energy prices and increased competition from Chinese exports. Germany's growth estimate for 2025 stands at just 0.2%, reflecting the shifting dynamics in global manufacturing.

Denise Cheok, analyst at Moody's Analytics, cautions that geopolitical tensions remain a wildcard. "Conflicts in Ukraine, the Middle East and simmering tensions elsewhere could drive food and energy prices higher, wreck trade flows, and raise inflation," she says. The recent escalation between China and Japan over Taiwan has added to concerns, though Cheok notes the economic implications have so far been marginal.

Looking ahead, economists suggest China's outperformance could reduce pressure on the People's Bank of China to ease monetary policy, potentially stabilising the yuan against a backdrop of Federal Reserve rate cuts. A stable currency would mitigate risks for property developers with offshore debt and support Beijing's ambitions to position the yuan as a reserve currency, while avoiding accusations of competitive devaluation from Washington.

As trade negotiations appear unlikely before 2027, China continues to demonstrate that export competitiveness extends beyond any single market, with diversification strategies proving effective against targeted trade measures. The coming year will test whether Goldman's optimistic projections materialise or whether domestic challenges, including deflation pressures and youth unemployment, constrain China's economic trajectory.

China | Economy, Trade, Geopolitics | |