Tariffs and Their Global Impact: A Note from the Desk of our Chief Economist
On 2 April 2025, the US Administration announced a set of tariff increases, bringing the US back to levels of protectionism last seen in the Great Depression era. Subsequent days have seen many tariffs postponed, while others increased, so the situation remains fluid.
This shifting trade policy is set to have far-reaching implications for the global economy, affecting various sectors and countries differently. As businesses and policymakers navigate this new landscape, understanding the potential outcomes is crucial.
In light of these developments, we are actively incorporating the impact of the tariffs into our forecasts, to be updated 15th April.
Here’s a breakdown of the key insights from the latest research:
A Return to Protectionism
The newly announced tariffs are more severe than previously anticipated, with rates exceeding those modelled in our earlier scenarios.
Varied Global Impact
The effects of these tariffs will not be uniform across the globe. Different countries and regions will experience varying levels of impact, with some economies more vulnerable due to their reliance on exports to the US. As nations begin to announce retaliatory measures, the landscape of global trade is poised for upheaval.
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Get in touchIf these tariffs remain in place, we can expect a substantial downgrade in growth forecasts for both the US and the global economy. While a recession may be avoided, world trade volumes are likely to suffer significantly, affecting economic performance through 2025 and beyond.
- China: The tariffs represent a significant challenge for China, likely prompting a fiscal response that may not fully counteract the negative economic impacts.
- Eurozone: The Eurozone could see a reduction in GDP growth by 0.2 to 0.3 percentage points due to the new tariffs. While a full retaliation from the EU is not anticipated, targeted responses may emerge, affecting investment and economic stability.
- UK: The UK’s growth forecast has been downgraded, with expectations now below 1% for this year. The primary impact will stem from weakened US and global demand, alongside heightened trade policy uncertainty.
- Asia-Pacific: Countries like Vietnam, South Korea, and Taiwan are particularly vulnerable due to their trade dependencies. Conversely, India and the Philippines may be better insulated from the tariff shocks.
- Latin America: While the region is largely spared from the brunt of these tariffs, the overall impact on growth forecasts cannot be overlooked. With a minimum 10% tariff applied to most countries and a generally low dependence on US exports, the effects may be limited but still significant.
Sector-Specific Consequences
The implementation of these tariffs will have sector-specific repercussions, dampening sentiment across various industries. Our initial assessments suggest that while a global recession might be avoided, the economic fallout could still be severe, particularly for sectors heavily reliant on trade.
Practical Implications
Businesses should prepare for heightened uncertainty and potential shifts in market dynamics. Understanding the specific impacts on your sector will be vital for strategic planning and risk management.
For a comprehensive analysis of these tariffs and their implications, please view our latest tariffs research and upcoming webinars.
Updated 14 April 2025.
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