Why the new tariff deals aren’t a growth game changer

The temporary reduction in US-China tariff rates means tariffs between the two economies could settle at a significantly lower level than we assumed in our baseline forecasts. While this reduces the odds of the US and the world economies falling into recession, it’s too early to make wholesale and large upward revisions to our growth outlook.

What you will learn:

• Still, at the very least the US-China tariff deal will provide firms with an opportunity to avoid prohibitive tariffs for 90 days, cutting the risk of product shortages in the US and supply chain disruption that could extend beyond its borders.
• In addition, evidence of a more pragmatic approach to tariffs could encourage firms in the US and abroad to hang on to staff, lessening the risk that a sustained softening in the labour market triggers a deeper and lengthier period of economic weakness than our forecasts suggest.
• However, neither the China deal nor the recently announced trade pact with the UK are formal, permanent agreements with the US. Lasting deals could prove difficult to reach once the more contentious trade issues begin to be discussed. The risk that any deals are open to review and termination by the US also suggests that investment-stifling uncertainty will persist.

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