Tariffs tensions spur global recession concerns

LONDON/BERLIN

US President Donald Trump’s tariffs since his inauguration and the rising uncertainties over trade policies around the world spur recession concerns this year, as international organizations reduce their growth forecast for the global economy.

Growth estimates sharply declined as China fights back against Trump’s tariffs with retaliatory tariffs ever since Washington unveiled the reciprocal tariffs imposed on over 180 countries on April 2.

The UN Conference on Trade and Development (UNCTAD) projects that global growth will slow to 2.3% this year, below the 2.5% threshold usually seen in a global recession. The projection marks a sharp slowdown compared to the annual economic growth rates in the pre-pandemic period.

The UNCTAD Economic Policy Uncertainty Index reached 460.2 in January, the highest of the century.

The World Trade Organization (WTO) downwardly revised its global growth forecast by 0.6% to 2.2%, citing tariffs and rising policy uncertainties. The WTO estimates that the global trade in goods will contract by 0.2% this year due to high tariffs, while the harshest situation is expected to be seen in North America with significantly fewer exports.

The 0.2% contraction is expected as pressure eases following Trump’s 90-day tariff pause. In the event of tariffs’ resumption, the contraction in global trade could reach as high as 1.5% this year.

The WTO estimates that the global economy will grow 2.4% in 2026.

Meanwhile, Fitch lowered its global growth forecast for the second time this year to 1.9% from 2.3% due to fueling tariff wars and uncertainties, while estimating a 1.2% growth in the US economy for this year, which is expected to sharply slow down in the fourth quarter.

China’s growth is expected to decline below 4% this year and in 2026 and the eurozone’s growth is estimated to remain well below 1%.

The recession in the US and China’s economic growth falling below 4.5% are likely to directly impact the world economy.

The IMF said Trump’s tariff poses great risks to the global economy, predicting a decline of about 2% to the US gross domestic product (GDP) and 1% to the global GDP, assuming that China and the EU will take countermeasures against Washington.

The OECD’s Economic Outlook report lowered its global growth forecast to 3.1% in 2025 and 3% in 2026, while estimating the US economy to grow 2.2% this year and 1.6% next year. The estimate was made before Trump announced reciprocal tariffs.

Additionally, the Bank of England said Washington’s tariffs could lead to weak global economic growth and put upward pressure on inflation. The Office for Budget Responsibility cut the UK’s growth estimate from 2% to 1% for this year.

- Trump’s 90-day tariff pause

Trump announced that the reciprocal tariffs that were revealed on April 2 would be suspended for 90 days for countries willing to negotiate, while the 10% base rate would still apply.

Tariff tensions between the US and China have been on the rise since the announcement of the 90-day tariff pause, as the US total tariffs on Chinese products reach 245%, with 125% reciprocal and 20% fentanyl and Article 301-related, and tariff rates ranging from 7.5% to 100% on some products.

China’s tariffs on US imports reached 125% at the same time.