Blanket 25% tariffs on Canada threatened by US President-elect Donald Trump earlier this week would push Canada into a recession in 2025, cause a sharp spike in inflation, and force the Bank of Canada to hold rates higher next year.
Topic: Global trade
The incoming Trump administration’s trade policies will have significant impacts on China’s sectoral outlook. There will be a small near-term boost to Chinese output prior to the introduction of tariffs owing to a frontloading of orders. However, the long-term impact will be overwhelmingly negative on Chinese industrial activity.
Since we adopted greater protectionism in our November US forecast, the risks to our baseline have become more balanced. But from a risk-management perspective it’s worth considering the impact of more aggressive tariffs, so we have modelled four downside scenarios:
u live in interesting times in US
The first release of the November baseline incorporated the election outcome, but in interesting and uncertain times, our baseline assumptions require more frequent updates to stay current with the evolving balance of risks.
In the second release of the November baseline, we updated our tariff assumptions, but the impact on GDP, inflation, and interest rates was small.
This report, commissioned by Humana People to People and Sympany+, assesses the socioeconomic impact of the second-hand clothing industry in EU27+ countries and selected African nations, exploring its economic value and employment effects across continents.
India has benefited from US trade rerouting away from China since 2018, albeit to a much lesser extent than some of its Asian peers. India’s export strengths largely lie in sectors of the ‘old economy’, where growth potential is limited and competition is fierce. We estimate that the US-China trade war so far has improved India’s export prospects only to a limited extent, dashing hopes that an escalation of the conflict could boost the lagging manufacturing sector.
India has not been able to attract a notably greater share of global FDI. Some of this is due to political resistance to stronger ties with China, some of it is held back by structural barriers
We remain concerned about the potential fallout in Latin America from a second Trump presidency in areas other than a renewed trade war with Mexico.
Asia has been at the forefront of the recent global AI frenzy. That partly reflects the region’s importance in global semiconductor supply chains. Global companies specialising in different stages of production can be found across Asia.
Our new proprietary business cycle phase indicator points to a trough in sight for industry, but with dispersion among sectors. High tech is leading the pack with output firmly on its way up. While most other sectors have yet to reach a cyclical trough, we believe they are now closing in.
We estimate that a 1ppt rise in US tariffs cuts imports from China by 2.5% in the long term.
Announced tariff increases by the US and EU on made-in-China EVs, if implemented, will increase EV prices and reduce demand. This will slow the adoption of EVs globally, to the detriment of the energy transition.
China’s production of electric vehicles is booming, accounting for nearly 70% of global EV sales in 2023 with 9.5 million vehicles produced. If the success of Japan’s auto industry in the last century is any guide, the rise of China’s EV sector promises to lift productivity and sustain the growth momentum of manufacturing for years.
We think the EU-China economic relationship will experience more friction in the future due to structural changes to China’s economy, EU fears about Chinese goods imports undercutting European industry, and national security concerns. However, the EU and China will continue to display high levels of interdependence, providing a strong incentive to avoid major disruptions.
Economic decoupling from China is ongoing, but the latest evidence suggests that, especially outside the US, the process is gradual and piecemeal. Trade decoupling may be slowly spreading from the US to other advanced economies, however surveys suggest foreign investors’ attitudes to China improved slightly in 2023, though they are still more negative than a few years ago.
The Biden administration’s additional tariffs on China are essentially a rounding error for inflation and GDP, carrying no implications for monetary policy. However, Biden’s decision to implement additional tariffs on China is another indication that US industry policy is shifting toward the stick approach, such as more use of tariffs.
We expect Chinese export price deflation to provide a helpful tailwind in the struggle to bring EM inflation back to target.
Oxford Economics have been commissioned by the International Chamber of Commerce (ICC) to provide an independent assessment of the economic impact of WTO dissolution. This report details our findings and the assumptions underpinning our analysis.
