The world economic order is on the precipice of a major upheaval. Forecasts anticipate a relatively sharp slowdown in the US economy starting in 2024 and going through the end of 2025. Analysts predict a decline of approximately one percentage point, raising concerns about potential stagflation while other regions maintain a more stable or even positive outlook. The outlook, especially for the Eurozone, does not look as bad, with projections of positive growth in the next few years.
In the US, economic indicators point to a tough time coming. This forecasted downturn will be exacerbated by deteriorating public finances. The suggested ‘One Big Beautiful Bill Act’ would be almost guaranteed to accelerate this decline even more. This legislation will make fiscal pressures exponentially worse, especially as inflation inevitably rises from increased tariffs. Yet as a consequence, the Federal Reserve’s monetary policy stance is very uncertain, making it more difficult to stabilize the economy.
The second half of 2025 is expected to bring continued turbulence, mirroring the chaotic first half as markets react to recent announcements and policy shifts. The European Central Bank (ECB) recently completed its rate-cutting cycle. They have just seen the light in terms of one last September cut of 25 basis points. This strategic decision suggests that the ECB feels confident about its monetary policy direction amid low growth and inflation returning to target levels.
The Eurozone’s growth forecast is a very optimistic 1.2% in 2025. Unlike the US, Europe heard the financial analysts’ cries. It is today extending those gains into a more sultry economic future, much more so than its transatlantic soulmate. The UK, while facing a gloomy economic outlook, has made strides towards rapprochement with the European Union, a development that many view positively in light of potential trade benefits.
In creating a global tariff war, the US is doing tremendous harm to the global economy. These impacts from this conflict will leave enduring impacts on the entire economic spectrum. Specifically, analysts caution that average effective tariffs will be significantly higher than average tariffs prior to Donald Trump’s return to the White House. These increasing tariffs are likely to put upward pressure on inflation in the US economy.
“One of the reasons why we should expect and prepare for another turbulent six months” – BNP Paribas
And the ramifications of both of these changes go far beyond our own borders. Furthermore, we know how intertwined today’s global economy is, and what happens in one part of the world can often be felt across the globe. At a time when the US is experiencing high inflation and an economic slowdown, this is especially important. As these challenges play out, other economies need to be concerned with how they withstand the ripple effects.
Europe’s outlook is much brighter, which is a sharp contrast to the doom and gloom expressed in the US. As US inflation is expected to increase in the wake of tariffs, European nations are following a far more favorable economic path. The ECB’s forthcoming interest rate decisions will be crucial, as they try to stimulate growth without sparking inflation.