Will the Recent Shift in US Trade Policy Hinder Global Economic Growth?
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Synopsis
Discover how a recent change in US trade policy is set to impact global economic growth negatively. This S&P Global report reveals the extent of the slowdown across various regions.
Key Takeaways
- US trade policy changes are poised to slow global economic growth.
- Major economies like China, India, and Japan will face declines in GDP growth.
- Emerging markets in Asia-Pacific will experience the most significant impacts.
- The Eurozone will see a 0.2 percentage points reduction in GDP growth.
- Uncertainties around US policies present risks to global economic stability.
New Delhi, May 2 (NationPress) The recent change in US trade policy is set to hamper global economic growth, impacting all regions adversely, as per a report by S&P Global published on Friday.
Forecasts indicate that both India and Japan may experience a slowdown of 0.2 to 0.4 percentage points in their GDP for the period 2025-26, while China is projected to suffer a 0.7 percentage points decline in GDP growth.
Emerging markets in the Asia-Pacific region, including Malaysia, Vietnam, Thailand, and Singapore, are expected to face the most significant GDP growth declines, estimated between 0.5-1.0 percentage points annually.
The S&P Global report further noted, "In comparison to our earlier forecasts, US GDP growth is expected to drop by approximately 60 basis points (0.6 percentage points) for 2025-2026, with Canada and Mexico experiencing similar declines."
The growth in the Eurozone is projected to be about 0.2 percentage points lower over the next two years, with Germany facing the steepest decline among major economies.
"A lot has changed since our last forecast in late March. The US government announced a sudden and significant increase in tariffs on April 2, 2025. In light of this announcement and its consequences, we are revising our GDP growth forecasts downward. Global growth is now anticipated to be 0.3 percentage points lower in 2025 and 2026 compared to previous estimates, affecting all regions negatively," the report stated.
S&P Global Ratings highlighted a considerable level of unpredictability surrounding the US administration's policy implementation and potential responses, particularly regarding tariffs, and their possible repercussions on global economies, supply chains, and credit conditions.
Consequently, the baseline forecasts incorporate a substantial degree of uncertainty. As circumstances evolve, we will assess the macroeconomic and credit implications of both potential and actual policy changes and adjust our guidance as necessary," the report continued.
This dramatic and uncertain shift in US trade policy has unsettled markets and raised concerns about a potential global economic slowdown. "In response, we have updated our macroeconomic outlook," the report stated.
S&P Global pointed out that the increase in US import tariffs, retaliatory measures from trading partners, ongoing concessions, and subsequent market volatility represent a shock to the system that undermines confidence and market prices. The real economy is expected to follow suit.
The report has also revised the inflation forecast for the US, predicting a significant slowdown in growth but does not anticipate a recession at this time.
"The risks to our baseline forecast remain predominantly on the downside due to a stronger-than-expected spillover from the tariff shock into the real economy. The long-term structure of the global economy, particularly the role of the US, is also becoming less certain," the report concluded.
Point of View
It's crucial for us to remain objective while analyzing the implications of the recent changes in US trade policy. Our focus is on how these shifts not only affect the US economy but also resonate across global markets, creating a ripple effect that can impact various nations, including India and Japan. Our commitment remains to provide accurate and insightful analysis on these crucial developments.
NationPress
17/06/2025
Frequently Asked Questions
How will US trade policy changes affect global economies?
The recent changes in US trade policy are expected to negatively impact global economic growth, with all regions experiencing declines in GDP. Major economies like China, India, and Japan are projected to see reduced growth rates.
What are the projected GDP impacts for specific countries?
India and Japan may face a slowdown of 0.2 to 0.4 percentage points, while China's GDP growth could decrease by 0.7 percentage points. Emerging market economies in Asia-Pacific could see declines of 0.5-1.0 percentage points annually.
What is the forecast for the Eurozone and its major economies?
The Eurozone is projected to experience a GDP growth decline of about 0.2 percentage points over the next two years, with Germany facing the most significant downturn among major economies.
Is a recession expected in the US?
While S&P Global has noted a significant slowdown in growth, they do not foresee a US recession at this time.
What are the risks associated with these policy changes?
The risks to the baseline forecasts are primarily on the downside, particularly due to stronger-than-anticipated impacts from the tariff changes on the real economy.
