From world leaders to the smallest manufacturers thousands of miles from Washington, decision makers across the world economy are plagued by uncertainty this weekend as they challenge themselves to match Donald Trump’s historic tariffs.
Experts unanimously agree that the impact of the extraordinary Rose Garden press conference on global growth on Wednesday will be negative, but how bad it remains uncertain.
“Economically, it doesn’t make any sense,” said Jordi Gual, former chairman of Caixabank, Spain’s largest domestic lender. “It’s a very problematic as it’s going back to a level that we haven’t seen since the 1930s.”
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Trump’s announcement that it will impose tariffs of 10% to almost 50% on the largest US trading partners — including a 34% border tax on Chinese imports and a 10% tax in the UK — was designed to encourage multinational companies to move their factories, jobs and supply chains to the US.
The president has promised to mark the arrival of a new “golden age,” but financial markets are expected to respond with a two-day, jarring sale, highlighting the potential risks of such unprecedented policies, causing higher prices in the US and growing worldwide.
The overall impact is difficult to predict. Because they rely on several factors, including how successful the government is in negotiating sculptures from tariffs. And how do US currencies react?
Normally, economists predict that the dollar will be strengthened as a result of tariffs and will mitigate the impact on US consumers in terms of higher prices, but since Trump’s announcement, greenback has been weakening in the forex market.
It could make the situation worse by unlocking more inflation already from higher import taxes. The US Central Bank may be reluctant to lower fees in the face of rocket prices.
“We are pleased to announce that Gerard Lyons, Chief Economist Strategist at Netwealth,” said:
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The scope of spending policies to offset a potential slowdown — for example, by tax cuts to increase demand — also appears to be constrained both inside and outside the United States.
Another important factor that will drive the scale of the hit to growth is how the US economic rivals are actively hit, and the Tit for-for tariffs are likely to make the bad situation even worse.
Some of the responses appeared Friday after Beijing announced that it would slap 34% tariffs on all US imports in place of its forensic targeted response. The market has entered the news.
Researchers at consultant Oxford Economics predict that Trump’s measures could knock global GDP growth this year to under 2%.
After 3.2% global growth in 2024, such results mark a significant decline, but will not reach a global recession. This is an economist view as GDP growth has not reached a global population growth rate of 0.9%.
However, the proposal is that the entire global trading system will stop the appearance of the mark size. The US has a long supply chain spread across key international markets, but trade remains a relatively small percentage of the economy, ranging from 30 to 30 to 30 to 30 to 30 to 30 to 30 to 30 to 30 to 30 tonnes. A survey by the Boston Consulting Group found that 80% of global trade in goods does not directly touch the United States.
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“We focus on the US being the biggest economy and the biggest importer, but things have changed for 10, 20, 30 years ago,” Butler said. “When we went back to the early 1970s, when Nixon removed the dollar from the golden standard and imposed a temporary 10% tariff on trade, the US was very important.”
The impact in different countries also varies significantly depending on the level of tariffs they face, and the extent to which they rely on exports to the US, and their broader dependence on trade.
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Analysts at Consultancy Capital Economics believe that EU growth could be 0.25% lower as a result of the 20% that exports face, and China’s growth could likely be 0.75% lower, for example.
For the time being, they are suggesting the UK, but the UK is not in Trump’s sight, facing a minimum 10% tariff, as it faces a minimum of 10% tariff.
“In the UK, the impact on growth is still a rounding error, which is 0.1%,” said Neil Shearing, chief economist at Capital. “It hits exporters in a particular sector, but it doesn’t necessarily collide with the entire UK economy.”
However, some economies in the southern part of the world face distractingly high tariffs and little negotiating power with the White House, the effects can be devastating. Cambodia faces 49% tariffs, 48% Laos and 46% Vietnam.
Back at Trump’s gateway, in the medium term, experts warn that the fundamentally protectionist US is likely to be less competitive and more expensive, and may encourage other economies to build deeper trading links.
Donald Trump and Chinese President Xi Jinping. China responds to tariff hikes with mutual 34% collection, sending a market that will plummet photos: Mandel Ngangreg Baker/AFP/Getty Images
“You have a donut. The US is an island surrounded by 10-60% tariffs and the rest of the world is on its own path,” says Creon Butler, who heads the World Economic and Financial Program at Chatham House in London.
“Look how the Soviet Union worked in the state of Autarky [economic isolationism]. If this US Island economy is there, lower quality, more expensive products, international supply chains will go elsewhere. ”
Meanwhile, economists are concerned that uncertainty itself is likely to have a damping effect in the near future. This can be as damaging as the customs policy itself.
“Some people claim he’s playing the madman’s strategy, or he’s doing some sort of random behavior so that his rival enemy can’t predict his next move,” Gual said. “Maybe geopolitics has some role to play, but economics raises the level of uncertainty and does not support economic growth and economic stability.”
The response of thousands of personal businesses and consumers over the next few days and weeks will be important in determining the impact of “liberation date.” For example, do multinationals rapidly restructure their supply chains? And are strong US consumers continuing to spend in the face of rising prices?
As Shearing warns, “The question is that there is a very broad range of different outcomes, not just ‘where is the tariff policy?’ ” he adds: “As economists, we don’t have the tools to address the human aspects of economics, and there are really no historical similarities.”
