Tariff dramas trim growth prospects, mostly in North America

We’ve lowered our US GDP growth forecast for 2025 by 0.4ppts to 2.0% and made much steeper adjustments to Canada and Mexico, reflecting our assumption of more aggressive US tariff hikes. The spillovers to the rest of the world are limited, and in the case of Europe offset by a defence-related fiscal boost.

While the global economy is still a long way from recession territory, our updated forecast points to this year being the weakest for world GDP growth since the global financial crisis, excluding 2020.

In this report, we share our thoughts on five questions related to assessing where the risks around the path for tariffs lie:

• To what extent do the latest tariff hikes make Trump’s underlying motives clearer?
• How much pain is Trump prepared to inflict on the US economy?
• How much will Canada and Mexico fight?
• What do the latest tariff hikes signify for the rest of the world?
• What tariffs on the rest of the world will the US announce in April?