US Tariffs and Global Economic Outlook: A Turning Point in 2025?

Introduction: A Strategic Shock with Global Consequences

In early April 2025, the global economy experienced a sudden jolt. A wave of unexpected US tariff hikes and mounting financial tensions revealed a profound shift in American economic policy—one with far-reaching global implications. At TAC ECONOMICS, we’ve unpacked this pivotal moment in our latest Global Outlook, providing insight into what’s driving this transformation and what to expect moving forward.

What Have We Learned?​

1. A Clear Break from Multilateralism

The US has decisively pivoted away from traditional trade norms, opting for a binary strategy:

  • Partners vs. Adversaries: Negotiations are open with over 70 countries (EU, Japan, Korea), while China faces punitive 145% tariffs.
  • Geopolitics over Efficiency: Trade and investment flows are now shaped by legal and geopolitical exposure—not economic logic.

2. Strategic Ambiguity Rules

There is no clear endgame:

  • The US administration offers no coherent goals—just shifting demands and transactional pressures.
  • For global businesses, this means increased exposure to unpredictable rules and a loss of trust in strategic stability.

3. Real Economic Costs Already Visible

  • Export losses globally are estimated in the hundreds of billions of dollars.
  • Investment freezes, disrupted supply chains, and weak visibility are slowing growth—especially in autos, electronics, and agriculture.

4. Bond Markets and Political Reactions Intertwined

The sharp correction in US Treasuries forced a 90-day tariff pause—highlighting a volatile new normal where political decisions are reactive to market shocks, not grounded in strategy.

2025 Outlook: Mapping a Fragmented Future

US-China Rivalry Intensifies

The one stable theme: geostrategic confrontation with China. Yet this policy is constrained:

  • Interdependence Remains: Key US sectors still rely on Chinese goods.
  • Asymmetric Risks Grow: China is reinforcing ties with the Global South, offering alternatives in standards, logistics, and technology.

Inflation: A New Spike Ahead

Our modeling shows a 1.5 percentage point increase in US CPI due to the tariffs, with likely spillovers into services and wages. This could push inflation to 4.5% in H2 2025—reviving stagflation fears just as growth slows.

Global Growth: A Year of Desynchronization

  • 🇺🇸 United States: Growth revised down to 1.0%, with downside risks from trade war escalation and institutional drift.
  • 🇪🇺 Eurozone: Around 0.7%, supported by easing inflation and fiscal drift—but uneven across countries.
  • 🇨🇳 China: Projected at 4.0%, down from earlier forecasts, with downside to 2.5% in a more adversarial scenario.

Markets Are Testing a New Regime

The global financial architecture is under stress:

  • US Treasuries lose safe-haven status amid inflation concerns and doubts over governance.
  • Dollar under pressure, with gold emerging as the fallback.
  • Central banks are cornered, especially the Fed, whose policy space is shrinking under political and inflationary pressure.

What to Watch in the Coming Weeks

We identify three tipping point themes to monitor:
  1. Can the US Steer Its Economy?

The tariff pause reassured markets temporarily—but without coherent macroeconomic coordination, policy credibility is eroding fast. The Fed’s independence and effectiveness are in question.

  1. Will Foreign Investors Keep the Faith?
  • US credibility is waning globally.
  • If key holders like China begin reallocating away from US Treasuries, financing risks will multiply.
  • China, meanwhile, is leveraging the moment to position itself as a stable economic anchor.

  1. Domestic Trust at Risk
  • US consumer sentiment has plunged to 2008 levels.
  • Businesses are delaying investments due to regulatory and institutional confusion.
  • A deeper concern: erosion of democratic checks and balances, with political instrumentalization of economic institutions becoming normalized.

Final Word: Is the US Still the Anchor of the Global Economy?

We may be witnessing a paradigm shift. The critical question is no longer just about tariffs or inflation—it’s about systemic trust in US leadership and institutions. Can the US reassert itself as a stable anchor for global markets, or are we entering a new era of economic fragmentation and institutional erosion?

The answers will begin to surface in the coming weeks.

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