- Article
- Global Research
- General Research Insights
US tariff turmoil: Lowering our global growth forecasts
- US tariffs and heightened uncertainty look set to deliver a significant blow to global growth through various channels
- US inflation will likely rise, but lower energy prices, stronger FX, and China trade diversion could lower inflation elsewhere
- We also show which countries’ exports could benefit as direct trade between the world’s two largest economies plummets
Even with the latest rollbacks, the magnitude of US tariffs now in place is higher than we anticipated for many trading partners, especially mainland China. Together with the impact of the associated financial market turmoil, they will undoubtedly have an economic impact.
We cannot be sure what negotiations with most trading partners will deliver, but more sector tariffs loom in the near term. Weaker US import demand is inevitable given such high tariffs and we also expect heightened uncertainty and the higher cost of capital will weigh on investment spending.
We have lowered our global growth forecasts to 2.3% (from 2.5%) in 2025 and 2.3% (from 2.7%) in 2026. The biggest downgrades are to the US, where we see 2025 Q4/Q4 growth at 1% versus 1.6% previously, and to mainland China and ASEAN 2025-26 growth, which we have cut by about 0.5ppt or more.
2.3%
HSBC global GDP growth forecast, 2025
3.3%
HSBC global inflation forecast, 2025
Inflation and monetary policy
The path for inflation is also uncertain, but tariffs will mean US goods prices are higher, even if much of the tariff impact weighs more on US growth than inflation. Elsewhere, weaker growth, lower oil and gas prices, and recent currency appreciation point to lower inflation. Trade diversion may also mean a near-term disinflationary impulse as goods intended for the US market are re-routed: just how much depends on how many more trade actions are taken by other countries vis-a-vis mainland China.
The path for inflation is also uncertain, but tariffs will mean US goods prices are higher, even if much of the tariff impact weighs more on US growth
Our long-held Fed view sees no more than 75bp of easing in 2025-2026, but we expect a stronger policy response elsewhere, including a little more from the European Central Bank and many emerging economies, even though we are not expecting central banks to cut rates aggressively. It is not just monetary policy that could soften the blow from trade uncertainty, which is already spurring fiscal, deregulatory, and structural measures from Europe to Asia.
Relative winners and losers
The tariff turmoil is bad news for the global economy but there will, as always, be relative winners and losers. Countries with lower exposure to US imports of tariffed items, particularly if also set to benefit from mainland China and EU fiscal stimulus, will be more immune.
We also identify which countries could see gains by supplying those components and products currently sourced in mainland China if US trade actions make the latter prohibitively expensive. Vietnam, Mexico, Thailand, and India are top of that list, if they can avoid large tariffs themselves. Meanwhile, economies like Brazil could benefit if mainland China increasingly sources more agricultural products from countries other than the US.
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