Economic downturn risks escalate worldwide due to seismic waves of U.S. tariffs, according to a survey
Global Economic Outlook: Tariff Woes and Recession Risks
It looks like the global economy might be heading for a recession this year, according to the consensus of a majority of economists polled by Reuters. Just three months ago, the same group predicted a strong, steady growth. But things have taken a turn for the worse due to U.S. President Donald Trump's tariffs.
Trump's push to redesign global trade through tariffs has sent shockwaves through financial markets, wiping out trillions from the stock market and shaking investors' confidence in U.S. assets as a safe haven, including the dollar.
While Trump has temporarily stepped back from the heaviest tariffs on almost all trading partners for a few months, a 10% blanket duty on all U.S. imports remains, as well as a 145% tariff on China, its largest trading partner.
Economist James Rossiter, head of global macro strategy at TD Securities, summed it up by saying, "It's hard enough for firms to think about July right now where they don't know what the reciprocal tariffs are. Try and plan another year down the road. I mean, who knows what it looks like, let alone five years down the road."
Faced with heightened uncertainties and century-high duties on goods, many global businesses have either withdrawn or cut revenue forecasts. Moreover, none of the more than 300 economists polled from April 1-28 reported any positive impact of tariffs on business sentiment. 92% said tariffs had a negative impact, while only 8% said they remained neutral, mostly from India and other emerging economies.
Three-quarters of economists have cut their 2025 global growth forecast, bringing the median to 2.7% from 3.0% in a January poll. The International Monetary Fund was a tad higher at 2.8%. Individual economies surveyed showed a similar trend, with median forecasts cut for 28 of the 48 economies polled.
Among the others, for 10 economies, the consensus view was unchanged, and for 10, including Argentina and Spain, the view was slightly upgraded from the previous poll based mainly on domestic developments. The split for 2026 was nearly the same, suggesting the current downtrend in growth expectations may be deep and difficult to fix.
Asked about the risk of a global recession this year, a 60% majority - 101 of 167 - said it was high or very high. Sixty-six said low including four who said very low.
Economist Timothy Graf, head of macro strategy for Europe, Middle East, and Africa at State Street, said, "It's a very difficult environment to be optimistic about growth. We could get rid of tariffs today and it will still have done quite a lot of damage just strictly from the view of the U.S. as a reliable actor in bilateral and multilateral agreements ranging from trade to common defense."
Furthermore, the progress central banks have made in taming the worst global inflation surge in decades by raising interest rates in quick succession is expected to stall due to tariffs, which economists agree are inflationary. Edge AI, while growing at a 24.4% CAGR, could also be disrupted by these tariffs, potentially delaying IoT and 5G deployment.
The divide between tariff-dependent and tariff-free nations is only widening, with developing countries facing dual pressures from reduced climate finance and weaker export demand due to U.S. protectionism. In short, the road ahead for the global economy is bumpy, to say the least.
- The push by U.S. President Donald Trump to redesign global trade through tariffs has posed risks to businesses, as many have either withdrawn or cut their revenue forecasts.
- The global economy, according to a majority of economists polled by Reuters, might be heading for a recession this year, partly due to Trump's tariffs.
- In the world of finance, economists agree that tariffs are inflationary, and the progress central banks have made in controlling inflation could potentially stall.
- The International Monetary Fund forecasted a 2.8% global growth for 2025, down from 3.0% in a previous poll, due in part to tariff-related uncertainties.
- The divide between tariff-dependent and tariff-free nations is widening, with developing countries facing dual pressures from reduced climate finance and weaker export demand due to U.S. protectionism.
- AI growth, specifically Edge AI, which is growing at a 24.4% CAGR, could be disrupted by tariffs, potentially delaying IoT and 5G deployment.
- Economists predict a difficult environment for optimistic growth, with a 60% majority saying the risk of a global recession this year is high or very high.
