U.S. tariffs reaching the highest level since 1930. The sharpest stock market crash since the pandemic. Government bond yields spiking and threatening a financial crisis. All in all, last week was not for the fragile-hearted. The U.S. has come perilously close to smashing the world trade order that it spent years constructing.
Even though Trump has paused his “reciprocal” tariffs for 90 days, the average U.S. tariff rate will still be over 20 percentage points higher than at the start of Trump’s term, assuming recently implemented tariffs on China and the baseline 10% levy on all imports remain in place. And the uncertainty created by last week’s moves will continue to rattle business and consumer confidence.
In this article, we’re going to explain how leading forecasters of the world economy—including banks such as JPMorgan and Goldman Sachs, and consultancies such as the Economist Intelligence Unit and Oxford Economics—are redrawing their forecasts in light of last week’s carnage.
Now more than ever, forecasters of the global economy need to be agile. They need both accuracy and speed; we now live in an era where major policy decisions are sometimes announced over social media, such as was the case with Trump’s 90-day tariff pause on his Truth Social platform.
Below, you’ll see how the Daily Updates to our Consensus Forecasts—available via our data platform and covering 198 economies and 39 commodities every day—have changed since Trump announced his plan for reciprocal tariffs on 13 February.
Economic growth
Since 13 February, the day that Trump announced his intention to impose reciprocal tariffs on the rest of the world, the outlook for this year’s GDP growth in the majority of the world’s economies has deteriorated, as can be seen from the above graph. The U.S. has seen one of the sharpest downgrades (-0.2 percentage points) of the 132 economies available in our PDF report (66 other smaller economies are available via our data platform):
There is also a large spread between panelists, highlighting the power of our Consensus Forecast to generate accurate, reliable forecasts:
With regard to other countries, Canada and Mexico have seen some of the sharpest downgrades since 13 February (-0.3 percentage points and -0.4 percentage points, respectively). The two countries were hit by an earlier 25% levy in March.
The vast majority of Euro area countries have also seen downgrades, particularly those where shipments of goods to the U.S. make up a large share of exports, such as France with its aircrafts, cognac, wine and perfumes; Germany with its BMW and Mercedes cars; and Italy with its cheeses and fashion products.
Our panelists have also cut their projections for most countries in ASEAN, East Asia and South Asia, reflecting the importance of exports for economic growth in these regions.
Notably, while projections for China’s GDP growth in 2025 are up slightly since 13 February, this is likely to change going forward given that U.S. tariffs against the country have escalated sharply in the last few days, now standing at a whopping 145%.
On China’s outlook, Goldman Sachs analysts said:
“The substantial rise in US tariffs on China is expected to significantly weigh on the Chinese economy and labor market. We anticipate the Chinese government will further intensify policy easing, projecting 60bp of policy rate cuts (vs. 40bp previously) and a 4.1pp expansion in our estimate of the “augmented fiscal deficit” this year (14.5% of GDP, up from 10.4% in 2024). However, even these significant easing measures are unlikely to fully offset the negative effects of the tariffs. We are revising our real GDP growth forecasts for 2025 and 2026 downward to 4.0% and 3.5%, respectively, from our previous projections of 4.5% and 4.0%.”
Inflation
The sharp cut in the Consensus Forecast for U.S. growth reflects the fact that our panelists now expect stronger U.S. inflation as a result of Trump’s tariffs; higher prices at the till will hurt consumer spending, the main engine of America’s economy. In the Euro area, Japan and the UK, inflation projections have also risen in recent months, with inflation predicted to exceed central banks’ 2.0% targets this year. That said, the net impact of U.S. tariffs on these countries’ inflation rates is more ambiguous: Much will depend on whether they eventually retaliate with tariffs of their own, the size of the hit to domestic demand, plus the evolution of their currencies vs the U.S. dollar.
On the impact of Trump’s tariffs on the U.S. inflation outlook, analysts at the EIU commented:
“Tariff effects will push consumer price inflation to 3.4% for 2025 (up from 2.5% previously), with monthly readings possibly exceeding 4.5% in the near term.”
Monetary policy
Aligning with these projections for inflation, our Consensus Forecast for the Fed’s policy rate has increased by nearly 20 basis points to just over 4.00% in the past two months. This suggests that the market thinks that the central bank is likely to make at most two quarter-point cuts this year. The Consensus Forecast matches with the projections released in December by the Fed, which earlier had forecast four quarter-point cuts. That said, in the last few days panelists have started to trim their forecasts, likely due to rising expectations that the Fed may be forced to cut rates in order to buttress a weakening American economy.
Bond yields
Our panelists have also raised their projections for 10-year government bond yields at the end of 2025. U.S. treasury and UK gilt yields are still projected to decline from their level at the end of 2024 as central banks reduce interest rates, but less sharply than before, remaining close to their highest since the financial crisis; several commentators have stated that the risk of a market meltdown is likely what prompted Trump to make the 90-day pause. German and Japanese yields are seen increasing even more sharply, to the highest levels since 2008 and 2011, respectively.
On the U.S.’s fiscal outlook, Fitch Ratings analysts said:
“A higher ETR [effective tariff rate] implies a bigger revenue boost, all else equal. However, we believe the tariffs significantly raise US recession risks and constrain the Federal Reserve’s ability to lower interest rates further given the expected shock to prices. A sharper economic slowdown would significantly weigh on non-tariff revenues and increase spending via automatic stabilizers. These effects would lag the immediate revenue boost from tariffs, but we think they would be evident by 2026, along with negative spillovers from financial market volatility.”
Exchange rates
In terms of exchange rates, the picture is complex. Economists initially began by reinking their forecasts to expect the U.S. dollar to strengthen as a result of Trump’s reciprocal tariffs. This is in line with economic theory, with tariffs reducing demand for imports and therefore for foreign currency. However, the U.S. dollar has in reality weakened against the euro, pound and yen since the start of the year—though China’s yuan has continued to depreciate as the central bank devalues the currency to keep exports competitive in light of the U.S.’ huge tariff hikes against the country.
On the recent weakening of the dollar, analysts at ING said:
“The dollar collapse is working as a barometer of ‘sell America’ at the moment. The rotation to other traditional safe-havens like CHF, the Japanese yen or even the euro is justified by the loss of USD safe-haven appeal. But the USD drop against high-beta currencies (including the China-sensitive AUD and NZD) is a signal that markets are heavily building positioning for a broad-based dollar decline.”
Oil prices
Our panelists have also cut their projections for average Brent crude oil prices in 2025 as a result of the expected hit to demand from tariffs and the anticipated boost to supply from OPEC+’s recent announcement of accelerated output hikes:
On the impact of tariffs and OPEC+ decisions on oil prices, ANZ analysts said:
“The tariffs’ impact on crude oil demand could be significant. Oil makes up around 33% of current global energy consumption, so it has a relatively close correlation with world output […]. We see further downside risks for oil prices due to an apparent shift in OPEC’s supply policy.”