In the latest development mode of “Dual Circulation”, the impact of COVID-19 and corresponding fiscal policies on China’s economy are evaluated and quantified by constructing the Global Trade Analysis Project (GTAP). The results show that in the three scenarios, GDP declines significantly, and all economic entities and sectors are severely affected. COVID-19 has a negative impact on household consumption, with transportation, accommodation, catering industry and other sectors suffering the greatest losses. Fiscal policies such as increasing fiscal spending and reducing corporate income tax rates, individual income tax rates and value-added tax rates are effective in mitigating the economic impact of COVID-19. Moreover, fiscal policies significantly improve the enterprises’ and residents’ income level, and stimulate residents’ consumption, but the policy effect is not obvious. Fiscal policies can effectively improve the output of each industry, but the boost to the output of manufacturing, mining, construction and other industries is limited. Therefore, we should take multiple measures to boost consumers’ spending, strengthen the stabilization of employment; we should also continue to implement a more proactive fiscal policy, vigorously support industries that suffered most, and strengthen our links with the international economy and its external circulation through a proactive foreign trade policy, so as to foster new advantages in international cooperation and competition.