After the announcement, the wait! On April 2, 2025, Donald Trump announced an increase in US tariffs… before announcing a partial 90-day postponement. Despite uncertainty about their final level, tariffs pose a threat to economic activity, prompting the International Monetary Fund (IMF) to revise its growth forecasts for 2025. This Killer Chart breaks down the situation.
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Why is this interesting?
Tariffs disrupted the IMF’s forecasting exercise, the results of which are published annually in April. To make this forecast, the IMF used the tariff levels announced by Donald Trump on April 2, 2025. Compared to its January 2025 forecast, the IMF revised global growth down by 0.5 percentage points (pp) for 2025, to +2.8%. While adjustments between April and January of the same year are not unusual, the 2025 adjustment is more than twice the average for the last ten years (0.2 pts in absolute terms). The effect of DD would therefore be unprecedented and particularly damaging on a global scale.
This Killer Chart attempts to represent the impact of tariffs in 2025 in three dimensions: the magnitude of the gap in economic activity forecasts (x-axis), the level of DD that would come into effect in July 2025 (y-axis), and dependence on the US export market (size of bubbles). The further to the left and top of the chart a bubble is located, the higher a country’s tariffs on exports would be and the greater the impact in terms of a decline in growth. This chart reveals considerable heterogeneity. Direct exposure to the US economy helps explain this phenomenon, but it is not the only explanation. Various channels seem to explain the impact of tariffs on growth.
What are we to make of this?
Firstly, it should be noted that, with a few exceptions (Canada, South Korea, Japan), several advanced economies have seen their growth forecasts revised downwards to a lesser extent than the global average. This is not inconsistent, as these economies are generally more resilient to shocks. What distinguishes the eurozone countries from their peers is (i) their relatively lower level of customs duties (20%[4]) and (ii) a relatively smaller share of exports to the US[5]. These two factors explain the three exceptions mentioned above: higher tariffs (nearly 25%), significant exposure to the US market, and the heavy weight of these exports in GDP[6]. South Korea and Japan quickly positioned themselves to negotiate with the US in the hope of reducing their tariffs.
Among emerging economies, the impact would be greater for Mexico (for reasons similar to those in Canada, even though both countries benefit from free trade agreements that protect certain exported products ) and for Asian countries (China, Vietnam, Thailand).
In China, uncertainty remains regarding the final level of tariffs, as the country has retaliated against the United States. For other Asian countries, the effect of the tariffs is direct (limited US export opportunities) and indirect via the acceleration of the slowdown in China, an economy on which they are highly dependent through trade channels. This is not unique to Asian countries but is a global observation (South Africa and Australia, to name but a few).
Countries with more moderate tariffs (10%, the minimum) appear to be less exposed, which may explain the relatively smaller revisions to GDP growth (Brazil and Turkey, for example). However, depending on the country, other transmission channels can be identified that threaten growth prospects: i) commodity prices, ii) remittances from expatriates, iii) trade, and iv) finance.
A decline in global growth would automatically weigh on commodity prices. Oil-exporting countries could suffer from this situation (e.g., Nigeria, Angola ), as could OPEC+ countries thatwere counting on a significant increase in their hydrocarbon production by 2026 (especially the United Arab Emirates). Although the effects are more ambiguous, a slowdown in global growth could mean a decrease in remittances from expatriates. The third channel, « commercial bis, » is related to various risks affecting both price competitiveness and the reorganization of international value chains.
The last channel, finance, is probably the most important but also the most uncertain. It is mainly linked to new trajectories for inflation, economic activity, and public deficits in the United States (see this BSI Economics forum). These changes could well lead to a reversal in the Federal Reserve’s (Fed) monetary policy, with significant global repercussions on sovereign debt markets, stock markets (already underway in April), capital flows, and currencies. At this stage, the dollar and US Treasury bonds are « losing their luster. » This has two main consequences: the search for alternative safe havens[11] and high volatility in long-term interest rates. These tensions on long-term rates compromise the transmission of key rate cuts and weigh on financing conditions (particularly in Europe). Emerging economies are also exposed, particularly those with high external financing needs (South Africa, Egypt, and Turkey, for example).
While for some countries, keen to have time to negotiate the best possible agreement with the United States, the wait until July may be short, it will probably be very long for the rest of the world and, unfortunately, conducive to an undesirable increase in volatility. During this period, the US authorities will have their work cut out to clarify a number of issues (tariffs, the future of J. Powell at the head of the Fed, the role of the dollar, the effectiveness of DOGE, etc. – there is no shortage of topics!) and limit uncertainty.
V.L, article written on April 24, 2025
[1] The IMF also considered alternative scenarios to reflect possible changes in trade policies.
[2] -0.1 pts in relative terms. Only the 2022 revision was higher (-0.8 pts), caused by the inflationary impact of the war in Ukraine. These comparisons are made excluding the health crisis in 2020 (-6.3 pts) and 2021 (+0.5 pts).
[3] Downward revision for 64% of countries in 2025, with 48% of them seeing a revision of more than -0.5 pts.
[4] As mentioned in the introduction, the tariffs in force until the end of the 90-day period are set at 10% for all countries (excluding China, see footnote 7). Without an agreement, these tariffs would rise to 20%.
[5] An average of 8.7% between 2020 and 2024 for the four largest economies in the eurozone (Germany, France, Italy, and Spain), compared with an average of nearly 14.4% in Switzerland and the United Kingdom.
[6] As such, a country like Singapore, even with DDs of « only » 10%, would experience a negative impact given that exports to the United States account for 6.3% of its GDP.
[7] According to recent statements by US Secretary of State S. Bessent, tariffs on China could return to levels that are still very high, but more reasonable and closer to 50% (compared to 145% otherwise).
[8] Financial aid could also have been included here, but is not taken into account in this analysis as it is not directly linked to Trump’s trade policy.
[9] Depending on the countries’ area of dependence, such as Latin America with the United States, where the effects would be accentuated by the new migration policy.
[10] For example: the search for markets outside the US with the risk of dumping (especially from China), which would affect the price competitiveness of certain countries (see this Killer Chart from BSI Economics for more information, with the example of steel); the race for new free trade agreements in order to reduce dependence on the United States (as in Vietnam), a reorganization of global value chains (as in Morocco), a change in the cycle of recovery in trade in electronic components (see this note from BSI), etc.
[11] With a positive effect on gold-exporting countries, for example, such as South Africa.
