Overview

• Overall, uncertainty remains the key theme across the global economy – as trade barriers, fiscal and monetary policy settings and foreign policy relationships are far from settled. This uncertainty, combined with new tariffs implemented this year, is expected to slow global economic growth.
• The risk remains that average tariff rates are ultimately higher than present rates. Recent US-China talks in London maintained tariffs in place but provided a fast track for critical rare earth mineral exports.
• The pause on reciprocal tariffs above 10% is due to end on 9 July and there is currently a lack of clarity regarding negotiations, given mixed messages from US officials. In addition, decisions on sector specific tariffs are yet to be announced.
• Global oil prices have returned to the levels of late 2024-early 2025 in response to the conflict between Israel and Iran. Fears are centred on disruptions to global energy supplies – with one-fifth of oil and liquified natural gas shipped through the Strait of Hormuz (between Iran and Oman).
• Growth in the US economy is expected to slow this year, particularly in the second half, as tariff impacts build. Growth should improve over 2026 as fiscal and monetary policy become more supportive.
• Our forecasts for China’s growth are unchanged this month – we see China growing by 4.3% in 2025 and 4.0% in 2026. That said, there remain wide confidence bands around these forecasts – with recent trade developments skewing risks more to the upside. Export volumes have held up stronger than expected, which may reflect trans-shipments via other countries – although this may risk higher US tariffs.
• Revisions to various forecasts mean that we now see the global economy growing by 3.0% in 2025 (from 2.9% previously) – with India the main upward revision, as the robust quarterly momentum evident late last year continued into this year. In some cases, such as the Euro-zone and Canada, growth has been boosted by a bring forward in activity ahead of tariffs but this is now unwinding. The outlook for 2026 is marginally softer – at 2.8% (2.9% previously). Consistent with the broad theme of uncertainty, there are wider than normal confidence bands around our forecasts at present.

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