Global economy: can momentum trump uncertainty?

The global economy has good momentum. Having expanded by 2.8% in 2024, fears of a global recession or soft landing gave way to a ‘no landing’ reality. GDP growth has remained steady and at a good pace for the past two years.

But uncertainty is high. A looming tariff war dominates the risk to the outlook. And that begs the question, is momentum enough to offset the uncertainty and risks?

We tackle this question in depth in our Q1 2025 economic outlook. Visit the store to read it in full and read on for a summary of some of the key themes.

Economic momentum is set to continue – but all eyes are on the US

We forecast a third consecutive year of robust growth for the global economy in 2025. However, uncertainty over economic policy in major economies is increasing and we expect that global trade barriers are likely to increase through 2025.

All eyes are on the US right now, as unpredictability is a feature of Trump’s presidencies. Tax cuts and tariffs are high on the agenda. The policy mix and timing are critical in assessing the aggregate economic effect for the US and beyond.

It’s difficult to predict the timing and magnitude of tariffs that will be imposed. We have assumed that tariffs are targeted rather than blanketed on all countries and all goods. A phased approach to increasing tariffs will create space for negotiation.

Regional economic outlooks are a mixed picture

The full report delves into the regional outlook. Highlights include:

• US: we forecast that the US economy will slow in 2025 and 2026.
• China: having hit 5% GDP growth in 2024, China will see softer growth in 2025, driven by import tariffs from the US and moderate domestic consumption stimulus.
• Europe: GDP growth in the EU was below 1% in 2023 and 2024. The outlook is somewhat brighter for the next few years as inflation retreats and interest rates continue to fall.
• India: heavy rainfall slowed economic activity in the June to September 2024 quarter, but the economy has started to recover since November.

Industrial production (IP) is improving – but it’s not a roaring resurgence

Global industry is picking up, but in a tempered manner. IP growth will outpace GDP in 2025 and 2026 as the global economic cycle pivots towards industry.

Europe and the US saw IP contract in 2024 – with industry in the shade of the main growth drivers: services and consumption.

Asia was the bright spot last year with China, South Korea, Taiwan, Malaysia and Vietnam outperforming our expectations. Being key targets of Trump's tariff policy, the Chinese and Vietnamese industry growth may see turbulence in 2025. However, other export-oriented Asian economies may benefit from the supply chain restructuring that ensues.

For more on this, and the long-term outlook, visit the store to read the full report. Or, read our latest analysis of US trade policies and tariffs.