Global Economic Impact of Trump's Tariffs

On April 2, President Donald Trump declared a "Liberation Day," implementing reciprocal tariffs on 180 countries and territories. A 90-day pause was announced on April 9 for all countries except China, and tariffs on Chinese imports were raised to 145%. China retaliated with a 125% tariff on U.S. imports.

Economic Projections and Reactions

• IMF Projections:
  • Global growth is expected to slow from 3.3% to 2.8%.
  • U.S. growth projected to decrease from 2.8% in 2024 to 1.8% in 2025.
  • China's growth expected to slow from 5% to 4%.
  • India's growth forecasted at 6.2% compared to an earlier projection of 6.5%.
• Comparison with Past Shocks:
  • Global Financial Crisis (2008): Growth fell from 2.7% to -0.4%.
  • Covid Crisis (2020): Growth declined from 2.9% to -2.7%.
  • The current tariff-induced slowdown of 0.5 percentage points is comparatively minor.

Analysis and Response

• Scott Bessent's Perspective:
  • Attributed market reactions to common deleveraging convulsions in the fixed-income market.
  • Hedge funds were selling bonds and equities to meet margin calls.
  • He downplayed the risk of a financial crisis similar to past events due to better bank capital positions.
• The Economist, although critical of Trump's policies, acknowledged that U.S. stocks did not signal a recession.

Conclusion

• President Trump's economic strategies may cause short-term challenges but are not expected to lead to a severe economic collapse.
• Despite criticism, there is a general consensus that drastic negative outcomes are unlikely, as supported by IMF forecasts and market recoveries.