GENERAL NEWS
U. S. tariffs cause global shock waves
U. S. President Trump’ s spate of tariffs on steel, aluminium and car imports has caused shock waves across the world. It has also sparked the threat of retaliatory tariffs from countries such as China and Canada, and trading blocs such as the European Union. On-again, off-again new levies from the United States continue to escalate global uncertainty and affect businesses, supply chains and trade in services worldwide. A temporary hold on some tariffs provides a crucial window for negotiations that may ease the current situation
“ President Trump’ s first 100 days in office have been the catalyst for a global economic policy shift towards narrowly defined national economic self-interest. Europe, China and other economies are adjusting to this new reality and are already adopting idiosyncratic economic policies aimed at reducing their reliance on the U. S. for defence and economic cooperation,” commented analyst Oxford Economics, in its latest research briefing on 22 April 2025.
“ In the near term, these U. S. policies aimed at addressing imbalances will have an adverse impact on productivity and real incomes as they raise production costs – either by moving production back to higher cost locations in the U. S. or by raising trade frictions. This adverse impact is likely to dominate any upside to the domestic economy from the reshoring of activity,” it added.
The prohibitive tariff rates will cripple U. S.-China bilateral trade and weaker global growth will hit Chinese exports to the rest of the world, added Oxford Economics.
As manufacturers explore various strategies to navigate this turbulent landscape— including potential production shifts and price guarantees for consumers— the broader consequences for key sectors
Above: U. S. President Trump. Right: Pierre‐Olivier Gourinchas, IMF.
( such as automotive) and their ecosystems remain to be seen.
IMF cuts global growth forecast
Image: Shutterstock. com.
On 22 April 2025, the International Monetary Fund( IMF) cut its global growth forecast to 2.8 % this year in view of the trade tensions. Every major economy is negatively affected. For the United States, it projected“ a significant slowdown”, with growth at a projected 1.8 per cent in 2025. That represents a 0.9 percentage‐point slowdown from its projections in January, with a 0.4 percentage point downgrade from the tariffs only. While global growth remains well above recession levels, all regions, it said, are negatively impacted this year and next.
At the IMF’ s World Economic Outlook, April 2025 press briefing on 22 April 2025, Pierre‐Olivier Gourinchas, Director, Research Department, IMF, said:“ The landscape has changed since our last World Economic Outlook update in January. We are entering
Image: Shutterstock. com.
a new era as the global economic system that has operated for the last 80 years is being reset. Since late January, many tariff announcements have been made, culminating on 2 April 2025 with near universal levies from the United States and counter-responses from some trading partners. The U. S. effective tariff rate has surged past levels reached more than 100 years ago, while tariff rates on the U. S. have also increased.
“ Beyond the abrupt increase in tariffs, the surge in policy uncertainty is a major driver of the economic outlook. If sustained, the increasing trade tensions and uncertainty will slow global growth significantly. Reflecting this complexity, our report presents a reference forecast which incorporates policy announcements up to 4 April 2025 by the U. S. and trading partners. Under these reference forecasts, global growth will reach 2.8 percent this year and 3 per cent next year, a cumulative downgrade of about 0.8 percentage points relative to our January 2025 WEO update. Our report also offers a range of forecasts under different policy assumptions,” he continued.
Gourinchas confirmed that, while global growth remains well above recession levels, all regions will be“ negatively impacted this year and next” adding that trade tensions will greatly impact global trade. For the United States, the tariffs represent a supply shock that reduces productivity and output and increases price pressures temporarily, he said. The tariffs will play out differently in different countries. For trading partners, tariffs act mostly as a negative external demand shock.
“ For the United States, the tariffs represent a supply shock that reduces productivity and output permanently and increases price pressures temporarily. This adds to an already weakening outlook and leads us to revise growth down by 0.9 percentage points to 1.8 per cent, with a 0.4 percentage point downgrade from the tariffs only,” said the IMF.
Gourinchas added that the IMF is also seeing a weakening of the dollar that is fairly broad‐based. Some of that is coming from weaker growth prospects in the U. S. and some from the increased uncertainty. It is also leading to a reassessment of the global demand for dollar assets, he added. n
8 | ismr. net | ISMR May 2025