Fitch is out with a note on global growth:
- The new US administration has started a global trade war that will reduce US and world growth
- Cuts 2025 US GDP growth forecast to 1.7% from 2.1%
- Cuts 2026 US GDP growth forecast to 1.5% from 1.7%
- Mexico and Canada will experience technical recessions with forecasts cut 1.1 pp and 0.7 pp, respectively
- World growth to 2.3% from 2.6% in December estimate, 2026 to remain weak at 2.2%
- Fiscal easing in China and Germany will cushion the impact of higher US import tariffs, but growth in the eurozone this year will still be a lot weaker than forecast in the December report
- Modelling suggests tariff increases will reduce GDP by about 1pp in the US, China, and Europe by 2026.
These forecasts assume tariff rates of 15% on Europe, Canada, Mexico and others plus 35% on China.
“There is huge uncertainty about how far the US will go and our assumptions could be too harsh. But there are also risks of a larger tariff shock including from an escalating global trade war,” Fitch says.
This article was written by Adam Button at www.forexlive.com.