#USChinaTensions

How will the latest tariffs impact global trade

**Impact of Latest Tariffs on Global Trade**

**1. Trade Volume Contraction**

The WTO projects a **0.2% decline in global merchandise trade** for 2025, reversing earlier growth forecasts. Combined risks (reciprocal tariffs + uncertainty) could deepen this to a **1.5% drop**, marking the sharpest decline in over a decade. North America faces a **>10% trade contraction**, while Asia/Europe may see modest growth.

**2. Economic Growth Slowdown**

Global growth is expected to slump to **2.3%** (near recession thresholds), down from 3.3% earlier estimates. The U.S. and China face **sub-1% and ~3.5% GDP growth**, respectively. Stagflation risks rise as tariffs spike **U.S. inflation**, limiting central banks’ ability to cut rates.

**3. Sectoral Disruptions**

- **Manufacturing**: U.S. firms face **supply chain bottlenecks** and lost foreign clients (e.g., Canadian orders for leather goods).

- **Commodities**: Tariffs on **vanilla (Madagascar)** and **cocoa (Ghana/Côte d’Ivoire)** threaten small exporters while raising U.S. consumer prices.

- **Services**: Expected growth revised down to **4%** (from ~5%) as tourism/finance sectors feel secondary effects.

**4. Uneven Global Impact**

- **Vulnerable Economies**: Tariffs on 57 nations (e.g., Cameroon, Lesotho) generate **<1% of U.S. tariff revenue** but cripple their export capacity.

- **India**: Domestic-driven demand may cushion growth at **~6%** (vs. 6.5% forecast).

- **China**: Faces **145% U.S. tariffs** on most goods, accelerating decoupling risks flagged by WTO.

**5. Market Uncertainty**

The **90-day tariff pause** offers temporary relief, but investment remains paralyzed due to policy unpredictability. Fed/ECB caution against premature rate cuts, prolonging financial market stress.