In a recent poll conducted by Reuters, a majority of economists from nearly 50 economies expressed heightened fears that the global economy is on the brink of a recession this year. The shift in sentiments marks a stark contrast from only three months ago when economists were optimistic about the world economic growth prospects.
The main culprit behind this gloomy outlook, as identified by the economists, is the trade policies implemented by U.S. President Donald Trump. His aggressive stance on tariffs and trade wars has severely disrupted business sentiment, leading to a cascade effect on financial markets. With trillions of dollars in stock market value wiped out and a loss of confidence in U.S. assets, including the dollar, as a safe haven, the repercussions of Trump's tariffs are becoming increasingly evident.
Despite the temporary suspension of some tariffs, a blanket 10% duty remains in effect, alongside a staggering 145% tariff on China, the U.S.'s largest trading partner. The unpredictability of ongoing trade tensions has left many businesses grappling with uncertainties, causing them to either withdraw or lower their revenue forecasts.
Economists unanimously agree that tariffs have had a profoundly negative impact on global business sentiment, with none of the poll respondents citing any positive effects. The consensus among the experts is that the global growth forecast for 2025 has been downgraded to 2.7% from 3.0%, indicating a significant slowdown in economic expansion worldwide. Even the International Monetary Fund's projection of 2.8% falls slightly below the economists' revised estimate.
Individual economies also reflect this trend, with median growth forecasts being revised downwards for the majority of the 48 economies surveyed. While China and Russia are forecasted to outperform the U.S. with growth rates of 4.5% and 1.7% respectively, countries like Mexico and Canada have seen substantial downgrades in their growth forecasts.
Moreover, the risk of a global recession in the current year has been flagged by 60% of the economists polled, underlining the severity of the situation. The disruption caused by tariffs is not only impacting economic growth but is also expected to hinder central banks' efforts in controlling inflation.
As the world navigates through this precarious economic landscape, the possibility of stagflation—an extended period of low growth, high inflation, and rising unemployment—looms on the horizon. With central banks struggling to meet their inflation targets amidst the tariff turmoil, the road ahead appears fraught with challenges and uncertainties for the global economy.