'Trump 2.0' looms large over the global economy

As we approach the year 2025, the global economy is poised for significant changes, particularly in light of the potential policies that may emerge from the United States under the leadership of Donald Trump. The International Monetary Fund has projected that global growth will stabilize at around 3. 2%. This figure suggests that while the economy is not expected to decline, it also indicates a lack of substantial improvement. For consumers, this could translate into higher prices for goods, especially if new tariffs are implemented. Tariffs are taxes imposed by governments on imported goods, which can lead to increased costs for consumers. Recently, Jerome Powell, the chair of the US Federal Reserve, indicated that the central bank may not reduce interest rates as much as previously anticipated. He stated, 'From here, it's a new phase, and we're going to be cautious about further cuts. ' This caution stems from ongoing efforts to combat inflation, which has been a pressing issue in recent years, exacerbated by the Covid pandemic and geopolitical tensions such as the war in Ukraine. Although inflation rates have shown signs of slowing, they remain a concern, with November figures for the US, eurozone, and UK standing at 2. 7%, 2. 2%, and 2. 6% respectively. Central banks are striving to achieve a target inflation rate of 2%, but the current economic climate presents challenges. The uncertainty surrounding potential US policies under Trump is a significant factor contributing to this uncertainty. Luis Oganes, head of global macro research at JP Morgan, emphasized that the primary obstacle to global growth is the unpredictability stemming from the US. Since Trump's election victory, he has threatened to impose new tariffs on key trading partners, which could lead to a more isolationist stance for the US. Oganes noted, 'The US is going into a more isolationist policy stance, raising tariffs, trying to provide more effective protection to US manufacturing. ' While this approach may provide short-term support for the US economy, it could have detrimental effects on countries that rely heavily on trade with the US, particularly Mexico and Canada. Maurice Obstfeld, a former chief economist at the International Monetary Fund, highlighted the potential consequences of tariffs on industries that depend on cross-border supply chains, such as the automotive sector. He warned that disruptions in these supply chains could lead to increased prices, decreased demand, and ultimately harm company profits, which could stifle investment levels. Obstfeld cautioned that introducing tariffs in a trade-dependent world could have adverse effects on global growth and potentially lead to a recession. The looming threat of tariffs has also influenced the political landscape in Canada, where Prime Minister Justin Trudeau faces challenges. In China, the economic situation is equally complex. President Xi Jinping acknowledged the difficulties but expressed optimism about the economy's trajectory. Exports from China are vital for its economic stability, and any decline in demand due to tariffs could exacerbate existing domestic challenges, including weak consumer spending and business investment. The World Bank recently revised its growth forecast for China, indicating a potential recovery, but the government is still focused on addressing internal issues. Michael Hart, president of the American Chamber of Commerce in China, noted that while some companies are considering relocating production due to US-China tensions, it is not feasible to completely replace China as a manufacturing powerhouse. The electric vehicle industry is another area likely to be at the center of global trade disputes. With over 10 million electric vehicles produced in China last year, concerns have arisen in the US, Canada, and the European Union regarding potential tariffs. Christine Lagarde, president of the European Central Bank, stated that trade restrictions are detrimental to growth and can lead to uncertain inflation. Germany and France, key players in Europe's economic landscape, have faced political instability, which could hinder growth in the eurozone. In the UK, rising prices may also result from tax and wage increases. The eurozone's inflation rate currently stands at 4. 2%, exceeding the target of 2%, complicating efforts to lower interest rates. In the US, wage inflation remains a concern, with many companies passing on increased costs to consumers, further contributing to inflationary pressures. A slowdown in the job market reflects a lack of dynamism in the economy, and economic growth is crucial for reversing this trend. If the economy performs well, businesses will begin hiring, leading to more job opportunities for individuals. As we move into 2025, Donald Trump will return to the White House, and his economic plans, which may include tax cuts and deregulation, could support continued growth in the US economy. However, the success of these plans will largely depend on the policies implemented, particularly those originating from the US.