The US-China trade negotiations yielded results beyond expectations, Goldman Sachs said in a report. On May 12, the US and China announced a 90-day suspension of tariff increases, slashing the effective tariff rate on US exports to China from 107% to 39%, and China's tariff rate on US exports from 144% to 30%.

The easing of tariff tensions triggered global forecast revisions. The yearly growth forecast for US real GDP in 4Q25 was raised from 0.5% to 1%. Besides, the expected timing for the Federal Reserve's policy rate cut was postponed from July to December. The probability of a recession in the next 12 months dropped from 45% to 35%. The earnings growth forecast for the S&P 500 for 2025 and 2026 was hiked from 3% and 6% to 7%, with the index target lifted from 5,700 and 6,200 to 5,900 and 6,500.

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In China, Goldman Sachs revised up its real GDP growth forecast for 2025 and 2026 from 4% and 3.5% to 4.6% and 3.8%, respectively. The export growth forecast for 2025 was added from -5% to 0%. The forecast for expanding fiscal deficit in 2025 and 2026 was cut from 13.5% and 14% to 13% and 13.5%. The earnings growth forecast for the MSCI China Index for 2025 and 2026 was revised up from 6% and 7% to 9%, with the 12-month target increased from 78 to 84.