Fitch: White House has started a global trade war that will reduce US and world growth

March 18, 2025 at 01:02PM

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.