by Global Investments Team
April 5, 2025
Introduction
In 2025, President Trump's administration introduced sweeping tariffs on U.S. imports, dramatically raising the average effective tariff rate—by some estimates to around 23–25%, a level not seen in a century. The new tariffs involve a 10% levy on nearly all imports and even higher rates on select goods like steel, aluminum, and autos. These extraordinary increases have triggered mounting uncertainty and volatility across global financial markets.
The International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) both sharply downgraded their economic growth forecasts as a direct result of these tariffs. The IMF has revised global GDP growth for 2025 down to 2.8%, from 3.3% earlier in the year, and cut the U.S. outlook to 1.8% for 2025, well below prior expectations. The OECD projects even more subdued expansion: U.S. growth is now expected at 1.6% in 2025 and could fall further in 2026, while global growth is set to decline from previous trends.
According to the OECD, greater tariff barriers are already driving up prices for U.S. businesses and consumers, with roughly 10% of the nation’s consumer spending directly or indirectly attributed to imports, aside from food and energy. Most of the increased costs are expected to be absorbed by end-users, fueling inflation and eroding purchasing power.
Major trading partners, including China, Canada, and the European Union, have responded with their own retaliatory tariffs targeting U.S. exports. The value of American goods affected by these measures has already reached $330 billion as of April, with the threats of further retaliation looming. These countermeasures are projected to reduce U.S. GDP by an additional 0.2% and undercut long-term revenue growth. Sectors such as agriculture and durable manufacturing are particularly vulnerable to these disruptions.
Economic uncertainty arising from these policies has led to higher bond yields and borrowing costs in traditionally stable countries, as well as increased volatility in global markets. The IMF has flagged elevated risks to financial stability, especially for emerging economies that now face the highest real financing costs in a decade and increased pressure to refinance debt at higher rates.
Both the IMF and OECD warn that sustained or escalating tariffs could further dampen global economic prospects and intensify inflationary pressures worldwide. Ongoing policy shifts and threats of additional trade restrictions have created an environment of unpredictability for businesses and policymakers.
In summary, the dramatic tariffs enacted in 2025 have curtailed global and U.S. growth rates, amplified inflation, increased business and consumer costs, and sparked widespread economic retaliation, with significant and ongoing risks to financial stability and global trade.