The global economy is set to slow amid higher tariffs, policy uncertainty and persisting trade tensions. Global real GDP growth is expected to ease to 2.9% in 2025-2026, down from 3.2% in 2024. Tariff and trade shocks are likely to affect economies unevenly, with China, the US, and trade-dependent countries more exposed. Global inflation would moderate further due to lower energy prices and weakening demand, though supply disruptions and export diversion could alter price dynamics.
This report comes in PPT.
US tariff hikes and trade policy ambiguity are adding challenges to the already cooling-down global economic landscape. In Euromonitor’s Q2 baseline forecasts, global real GDP growth is expected to ease to 2.9% in 2025 and 2026, down from 3.2% in 2024. Downside risks dominate the outlook, as trade tensions linger, weighing on business and consumer confidence. Under a pessimistic Trump policies scenario (Trump Total Agenda), global real GDP could grow slower by 0.6 percentage points (pp) in 2025 compared to the baseline. Meanwhile, a tariff de-escalation scenario (Trump Tariff Easing) could boost global growth by 0.2pp in the same year.
Businesses and consumers in both developed and developing countries are likely to face a slower growth environment in the near term as trade disruptions undermine manufacturing and consumption. The impacts of tariff-induced shocks, however, vary across different economies. The US, China, and trade-dependent countries are more vulnerable to a rise in tariffs and trade protectionism, while diverse economies such as India are more resilient. As new trade routes may emerge, some countries (eg India) and regions (eg Southeast Asia) may benefit from expanded trade networks.
Global consumer price inflation is forecast to decline further to 4.1% in 2025 and 3.4% in 2026, driven by lower energy prices and slowing demand. Higher US tariffs and growing trade tensions, however, are adding complexities and uncertainties. Decline in imports can push up prices in the tariffing countries, while reduced global trade may increase price pressures globally. Heavily-tariffed countries such as China can divert their excess goods to other markets including Europe and Southeast Asia, dampening inflationary pressures in these markets.
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