Overview

• The start date for US reciprocal tariffs was extended to 1 August, allowing more time for trade negotiations. The extension came with some changes to the reciprocal tariff rates. New sectoral tariffs are also looming – either sooner (copper) or later (pharmaceuticals). The US is also focussed on trans-shipments, which risks reigniting tensions with China.
• Where US tariffs ultimately settle is still very unclear. As there is a high of chance of further tariff increases, risks to the global outlook are tilted to the downside. In the meantime, trade policy uncertainty remains elevated, weighing on business and consumer sentiment. Financial markets have largely taken recent developments in their stride, but this may change if new tariffs were to be implemented.
• Fiscal policies are moving to offset tariff impacts. In the US, the One Big Beautiful Bill Act has been passed and will provide fiscal stimulus, mainly from later this year. This is on top of a move to more supportive fiscal settings in the Euro-zone.
• Monetary policy is also generally becoming more supportive. Although the US Fed is currently on pause, as it assesses how tariffs will affect both sides of its mandate (inflation and full employment), we expect rate cuts by the end of the year.
• Growth in the US economy is expected to be soft in the second half of 2025, as tariff impacts will dominate but it should then start to improve as fiscal support and rate cuts come through. Some other countries – such as in the Euro-zone, UK and Canada – saw growth initially supported by a bringing forward of activity ahead of tariffs, but this has been unwinding, and growth is likely to be modest for the rest of 2025 (with a contraction possible in Canada) before improvement in 2026.
• We have revised our forecasts for China’s growth this month (reflecting the resilience in export volumes in Q2). We see China growing by 4.8% in 2025 (4.3% previously) and 4.0% in 2026 (unchanged).
• Our global forecasts have been revised slightly higher but we still only see soft growth by historical standards. The 2025 growth forecast has been revised up to 3.1% (from 3.0%) on the back of China’s first half resilience. The 2026 forecast is also up – to 2.9% from 2.8% but to two decimal places the change is only 0.01ppts. We have extended our forecasts out to 2027 and see slightly better growth that year (3.0%), with gains across many regions held back by the ongoing structural slowing in China.

For further details, please see The Forward View Global (July 2025)