UBS AG added to a series of growth downgrades for China with the most pessimistic forecast among major banks, predicting the economy will expand just 3.4% this year as US tariffs choke exports.

The Swiss bank, which previously saw growth in 2025 at 4%, maintained its estimate for next year at 3%. Both forecasts are the lowest of all projections for the economy compiled by Bloomberg.

“The tariff shock poses unprecedented challenges to China’s exports and will set forth major adjustment in the domestic economy as well,” UBS economists including Tao Wang wrote in a note Tuesday.

Goldman Sachs Group Inc. and Citigroup Inc. are among global banks that cut their outlook for China in recent days, with most economists doubting Beijing can achieve the official target of around 5% growth this year.

Assuming current tariff increases stay in place, they will likely drag down growth in China’s gross domestic product by more than 2 percentage points despite additional stimulus expected from Beijing, according to UBS.

The economists conceded their view has “high margins of error” due to the “extremely large uncertainty” surrounding the eventual tariff rates.

Exports to the US are expected to fall by two-thirds in the coming quarters and total overseas shipments may drop by 10% in dollar terms this year, they added.

“We think some of China’s other trading partners may also raise tariffs on Chinese goods in the coming months, but likely only on specific products and not in similar magnitudes as the US tariffs,” they said.

China’s economy likely held up well in the first quarter before the biggest tariff hikes came into force.

Analysts broadly expect the negative impact of the levies to become evident in the coming months, after President Donald Trump raised total tariffs slapped this year on most Chinese goods to 145%.

The Chinese government is likely to add fiscal stimulus worth up to 2 percentage points of GDP to bolster growth, with a focus on expanding domestic demand and helping businesses and households fend off the tariff shock, according to UBS.

It expects the People’s Bank of China to cut policy rates and the amount of cash lenders must keep in reserve starting as soon as this month. The economists see at least 30-40 basis points of rate cuts.