Investing.com-- China’s economic growth is expected to slow to 4.0% in 2025 as it contends with potential US tariff hikes and ongoing property sector challenges, according to a UBS research note.

The tariffs, anticipated to be announced in the first quarter and implemented in stages starting in the third quarter, are projected to reduce China’s GDP growth by over 150 basis points through weaker exports and manufacturing investment, UBS analysts said in a note.

While the property sector remains under pressure, UBS forecasts smaller declines in sales and investments compared to previous years.

Recent policy easing, including mortgage rate cuts and urban renovation initiatives, has shown some effect, particularly in major cities. However, elevated inventory levels and tepid household sentiment continue to weigh on the market, with nationwide stabilization not expected until 2026, analysts wrote.

In response to these challenges, UBS anticipates increased fiscal and monetary policy support. The government is likely to announce measures during the March National People’s Congress meeting, including a higher fiscal deficit target of around 4% of GDP and the issuance of special government bonds.

UBS also expects a policy rate cut of 30–40 basis points in 2025 and further easing in 2026.

Lingering deflationary pressures, with core consumer inflation hovering around 0%, add to the economic concerns. The renminbi is expected to depreciate modestly to 7.6 against the U.S. dollar by the end of 2025 due to tariff impacts and a wide U.S.-China yield spread, according to UBS.

UBS highlights the potential for surprises, including stronger-than-expected U.S. economic growth or a faster property market recovery, which could alter China’s outlook. However, uncertainties surrounding global trade and domestic policy effectiveness remain significant hurdles for sustained growth.