Trump’s tariffs will likely exacerbate the slowbalisation globally
Our latest economic forecasts assume Trump will impose a 30% across-the-board tariff on Chinese imports into the US, a 25% tariff on selected goods from Europe including steel, aluminium, and automobiles, and a 10% tariff on selected goods in Canada, Mexico, Japan, South Korea, and Vietnam. This would take the effective tariff rate on US goods imports to around 6% from 2%.
What you will learn:
- Donald Trump’s victory in the US elections heralds a potential upheaval in global trade. We don’t know exactly what tariffs Trump will enact, but his campaign rhetoric and his political appointments so far suggest he will implement significant changes to policy.
- From Trump’s first term, we’ve learnt that trade wars affect a broad range of goods, not just those facing tariffs. So, the hit to trade outside of China may extend beyond the selected goods on which we expect tariffs will be applied.
- New tariffs on China would intensify its decoupling from the US which has already been building over the past eight years. On top of this, the inclusion of Asia in the next phase of tariffs would limit the ability to reduce the hit from higher tariffs by rerouting trade. Consequently, we think Trump 2.0 will add to the slowbalisation that is already taking place.
- We expect Trump’s tariffs will reduce global trade values by more than 7% by 2030 compared to our pre-election forecasts. By contrast, we only anticipate a modest 1.8% hit to nominal GDP over the same period.
Tags:
Related Posts
Post
Japan’s tariff turbulence to flatten near-term growth
We've cut our GDP growth forecasts for Japan by 0.2ppts to 0.8% in 2025 and by 0.4ppts to 0.2% in 2026, reflecting higher US tariffs and heightened global trade policy uncertainty. We now forecast that Japan's economy will barely grow over 2025-2026 on a sequential basis.
Find Out More
Post
25% auto tariffs especially painful in Japan and South Korea
US tariffs of 25% on all automobile and auto parts will weigh heavily on the Japanese and South Korean automotive sectors. A GTAP analysis suggests Japanese and South Korean automotive production will each shrink by approximately 7%. The impact is larger than suggested by bilateral trade data, because vehicles assembled in other countries before being shipped to the US will also be affected, dampening domestic auto parts production.
Find Out More
Post
‘Liberation Day’ 24% tariff will limit Japan’s growth
The 'Liberation Day' tariffs, together with separately announced higher tariffs on auto imports to the US, will lead us to cut our growth forecast for Japan. The direct impact of the tariffs will end the modest growth we projected in March, and we now think the economy will barely grow in 2025-2026. This initial estimate does not consider the indirect impact from high trade policy uncertainty and retaliation from other economies.
Find Out More