Fitch Ratings has sharply lowered its outlook for global economic growth this year due to U.S. import tariffs and ongoing trade tensions around the world.
The New York City-based ratings agency has cut its world economic growth forecast by 0.4 percentage points. Fitch says it now expects U.S. growth in 2025 to slow to 1.2%, falling to just 0.4% in the year’s fourth and final quarter. At the same time, China’s economy is forecast to expand by less than 4%, and Europe’s economy is estimated to grow by less than 1% in 2025.
As a result, worldwide gross domestic product (GDP) is forecast to grow by less than 2% this year, the weakest growth since 2009 during the aftermath of the financial crisis. (Fitch’s outlook excludes the 2020 Covid-19 pandemic). The ratings agency said that a trade war between the U.S. and China, and disruptions caused by tariff escalations are driving a pronounced slowdown in the global economy.
Bilateral Tariffs
U.S. tariff hikes have led to retaliation by China that have pushed bilateral tariff rates on each country to more than 100%. Consequently, economic growth in both the U.S. and China is expected to cool considerably in coming months, says Fitch Ratings.
The agency also warns that escalating tariffs and trade wars risk causing a “supply shock” to the U.S., accompanied by reduced business investment and sluggish wage growth. Fitch raised its U.S. inflation forecast above 4% as consumer prices and economic uncertainty rise. China’s economy also faces strong headwinds from a housing downturn and falling consumer prices.
Fitch concluded that it expects the U.S. Federal Reserve to delay any interest rate cuts until late 2025, even as growth slows markedly.
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