Key Takeaways
- Trump’s tariff announcements are expected to have widespread implications for global trade and economic activity.
To reflect the likely changes in the outlook, we have adopted a new base case scenario called “tariff uncertainty dominates”, in which our tariff assumptions are close to what the president promised on the campaign trail.
- As a result, we have downgraded our global and US GDP growth forecasts. The latter now sits at 1.3% for 2025, with a 50% probability of a recession over the next 12 months.
- We have revised up our US inflation forecasts, and expect US CPI to average above 3% in 2025. This will constrain the Fed, although it will still ease interest rates further this year. For the rest of the world, the tariff shock will weigh on inflation and interest rates.
As the name of our scenario suggests, uncertainty remains extremely elevated as trade policy volatility continues.