While risks around a potential US recession in 2025 have receded, the focus on Trump’s policies is whether they may create an inflationary ‘perfect storm’. Our current forecasts for the US economy in 2025 are for growth of 1.5% and inflation at 3%, though with downside risks to growth as tariff rates become clearer.
Key Highlights
- Trump 2.0 could catalyze growth in Europe, as governments are obliged to spend more under pressure from the US and its threats to cut its involvement in NATO. The recent EU-US trade deal, while a bad one in absolute terms, is actually OK relative to the alternatives and those struck with some other countries, especially in the context of Germany’s fiscal pivot. The anticipated hit to growth of around 0.5% off GDP would still align with the house view of around 0.7% growth in the eurozone for 2025. Tariffs remain net disinflationary and growth negative for Europe, with euro strength providing some cover for the ECB to enact another cut this year.
- The growth outlook in the UK is also deteriorating, as GDP shrank 0.1% month on month in May, while prices accelerate, though the Bank of England (BoE) anticipated the summer ‘bumpy path’ to inflation at 3.7%, before a sharp fall later in the year. The combination of disappointing growth and inflation noise still leaves room for further gradual rate cuts over the remainder of 2025.
Scope
- This report discusses how the policies of President Trump, especially on tariffs, will impact the US and global economy.
- It explores his likely policies and what their impact will be.
- It examines the sectors that will potentially be most impacted, including energy and automotive.
Reasons to Buy
- Understand the expected impact of US tariffs on inflation and the global economy, as well as implications for key sectors.
Table of Contents
- Executive Summary
- Part 1: Global Economic Outlook
- Part 2: Sector Analysis
- Appendix 1: Glossary
- Appendix 2: Thematic Research Methodology
