The risks of both US and global recessions are growing as a result of uncertainty created by the trade tariffs being variously proposed, introduced and rolled back by US President Donald Trump, according to a new briefing.
GlobalData’s Tariffs and Trade Wars Executive Briefing (First Edition) states that concerns over a potential US recession, in particular, this year are growing as investors reassess the economic impact of the country’s new tariff policies.
“Keen US interest in shutting backdoors to Chinese triangulation of imports will further disrupt global supply chains, with surging risks of US stagflation and global recession if Trump overplays his hand,” the briefing says.
It adds: “Despite the 90-day pause on most reciprocal tariffs, the near- and longer-term outlook is dogged by tariff uncertainty, complicating investment and management decisions. The greatest risk is that ongoing market volatility triggers reflexivity, sending corporate and consumer confidence plummeting, with indications that this is already happening.”
The briefing notes “a silver lining” in that there could be a strengthening of regional and inter-regional trade ties outside the US. However, it maintains that the outlook remains very uncertain and volatile – largely because the motives and agendas underlying Trump’s policies are tangled and contradictory.
“This points to high levels of uncertainty – a feature rather than a bug, which Trump likes to weaponize for tactical advantage,” it says. “The outlook is further clouded by questions over which countries will follow China in imposing retaliatory tariffs on US goods and the timelines for potential trade negotiations with the US that could see tariffs reduced.”
The briefing adds that any prospective benefits of tariffs in the US would only emerge gradually, along with the tax cuts and deregulation promised by Trump.
A key question it suggests needs consideration when assessing the likely impact of tariffs is how high the pain threshold is for the US administration in pursuing its goals. GlobalData’s view is that it is “probably lower than its main trade-war opponents.”
The briefing explains: “Decades of outsized market gains and high household exposure to equities mean negative wealth effects will be stronger in the US. There is limited fiscal policy headroom with dented international confidence hurting the US dollar and Treasury bond market, while higher prices complicate the Fed’s scope to reduce interest rates. Trump’s 9 April decision to pause most ‘reciprocal’ tariffs for 90 days suggests that bond market turbulence prompts greater caution in tariff policy.”
