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.
