The latest data suggest that the world economy got off to a weak start in 2025 even before most tariffs were implemented. While tariff front-running provided a boost to global industrial activity and exports to the US in Q1, this should soon fade. Consumer confidence has plummeted in the US and points to a subdued outlook for consumption across advanced economies. Meanwhile, although renewed fiscal spending in China should help cushion the blow from US tariffs, various headwinds mean that growth will slow again before long. Altogether, this suggests that global GDP will grow at a below trend pace in 2025 and 2026. Weaker activity will bear down on underlying inflation pressures and allow most central banks to continue cutting interest rates. However, a rebound in inflation in the US due to Trump’s stagflationary policies will prevent the Fed from cutting further this year.
Subscriber content
Read this in full, free
Start a free trial and use one of your 10 free starter credits to unlock this piece.