Economists from Allianz Trade emphasize that the tariffs announced by Donald Trump have exceeded analysts’ expectations, ushering in a phase of negotiations and retaliations that increases uncertainty.
“It is unclear what the final scenario for tariffs will be, but the cost of uncertainty is high,” they note, estimating that “global GDP growth will fall to just 1.9%, the lowest level since 2008.”
Global goods trade is expected to contract by 0.5% in volume, while inflation in the US could peak at 4.3% by summer, according to projections from Allianz Trade.
Most analysts consulted believe the highest costs will be borne by the American economy itself.
Johanna Kyrklund, Chief Investment Officer at Schroders Group, notes that “Trump’s initial round points to higher tariffs than expected, and the group’s economic forecasts are being revised downward, with anticipated US GDP growth around 1% by 2025.”
Paolo Zanghieri, Senior Economist at Generali Investments, highlights in an analysis note that the tariffs are expected to impact the US more, reducing its GDP by 1.5%. He adds that uncertainty persists, affecting the dollar and stock markets in the short term.
Henrique Valente, an analyst at ActivTrades, also underscores that the tariffs “surprised markets with their scale and breadth,” and investors are now facing a deep reassessment of immediate economic risks and possible global trade reconfiguration in the coming years.
The analyst predicts that “uncertainty over US trade partners’ retaliations will continue to weigh on markets in the coming weeks, fueling risk aversion and maintaining high volatility,” considering that China has already retaliated with 34% tariffs on American goods and the EU is set to announce its response on April 9.
This situation also poses a challenge for the US Federal Reserve, a concern echoed by most analysts.
Paul Diggle, Chief Economist at Aberdeen, estimates that “the total increase in US tariffs yesterday [Thursday] and in recent weeks could add 2% to price levels and push US GDP down by 1-2%.”
Given this scenario, the Federal Reserve (Fed) “faces a difficult trade-off,” he indicates, considering the recent sharp increase in inflation expectations.
In a speech today, Fed Chairman Jerome Powell acknowledged that the new tariffs are expected to accelerate inflation and slow economic growth but emphasized that the central bank’s focus will be maintaining temporary price increases.
“Our obligation is […] to ensure that a one-time increase in price levels does not become a continuous inflation problem,” Powell stated.
