Seismic shift in US trade policy will slow world economic growth: S&P Global

New Delhi, May 2 (IANS) The seismic shift in the US trade policy will slow world economic growth, with all regions being affected negatively, according to an S&P Global report released on Friday.

While India and Japan are expected to slow down by 0.2 to 0.4 percentage points in 2025-26, China is expected to take a 0.7 percentage points hit to its GDP growth.

In emerging markets (EM), more open Asia-Pacific economies, such as Malaysia, Vietnam, Thailand and Singapore, see the biggest decline in GDP growth, falling by 0.5-1.0 percentage points per year.

“Relative to our previous forecast round, the US GDP growth falls by about 60 basis points (0.6 percentage points) over 2025-2026, while Canada's and Mexico's GDP growth falls by a similar amount,” the S&P Global report stated.

The Eurozone GDP growth is about 0.2 percentage points lower over the next two years, with Germany taking the biggest hit among the major economies, according to the report.

“Much has changed since our previous forecast round in late March. The US administration announced an unexpected, steep rise in tariffs on April 2, 2025. Following the announcement and the aftermath, we are lowering our GDP growth forecasts. Global growth is 0.3 percentage points lower in 2025 and 2026 relative to our previous forecast round, and all regions are affected negatively,” the report observed.

S&P Global Ratings believes there is a high degree of unpredictability around policy implementation by the US administration and possible responses -- specifically with regard to tariffs -- and the potential effect on economies, supply chains, and credit conditions around the world.

“As a result, our baseline forecasts carry a significant amount of uncertainty. As situations evolve, we will gauge the macro and credit materiality of potential and actual policy shifts and reassess our guidance accordingly,” the report added.

A seismic and uncertain shift in US trade policy has roiled markets and raised the specter of a global economic slowdown. "As a result, we have updated our macro view," said the report.

According to S&P Global, the jump in US import tariffs, trading partner retaliation, ongoing concessions, and subsequent market turbulence constitute a shock to the system centered on confidence and market prices. The real economy is sure to follow.

The report has also raised the inflation forecast for the US. “We see a material slowdown in growth, but do not foresee a US recession at this juncture,” the report stated.

“The risks to our baseline remain firmly on the downside in the form of a stronger-than-anticipated spillover from the tariff shock to the real economy. The longer-term configuration of the global economy, including the role of the US, is also less certain,” the report added.

--IANS

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