A strong escalation in American prices has shook the world markets, fueling fears of a wider economic slowdown. In response, S&P Global Ratings has revised its macroeconomic perspectives, warning to slow down growth in GDP, increase in the risk of American inflation and recession. The training effects of the April scanning measures are starting to crystallize with important consequences for the global economy.
“The leap of American import prices, reprisals of trade partners, current concessions and subsequent market turbulence are a shock for the confidence and market prices system. The real economy is sure to follow, but how much? ” said Paul Gruenwald, world chief economist at S&P Global Ratings.
S&P Global has degraded GDP forecasts in most regions and increased its American inflation prospects, citing growing risks and increased uncertainty. “We have again lowered our GDP growth forecasts for most countries and increased our inflation forecasts for the United States,” said Gruenwald.
Although an American recession is not currently projected, the risk profile has worsened. “The risks for our reference base remain firmly downwards in the form of an overflow stronger than expected from the price shock to the real economy,” he added.
Global growth should now be 0.3 lower percentage points in 2025 and 2026. Regional distribution includes:
- American GDP: down 60 base points (BPS) on 2025-2026.
- Canada and Mexico: similar declines.
- Euro zone: 0.2 lower percentage point; Germany has struck the hardest.
- China: 0.7 drop percentage point in 2025-2026.
- Japan and India: discounts from 0.2 to 0.4 percentage points.
- Emerging Asia-Pacific (for example, Malaysia, Vietnam, Thailand, Singapore): drop from 0.5 to 1.0 percentage points per year.
Historical levels and world fallout
The announcement of April 2 introduced a 10% flat rate and a variable rate based on commercial deficits. The actual American rate rate has increased to around 24% – the highest since the 1920 Smoot -Hawley era. Reprisals varied: China reacted aggressively, resulting in mutual prices of 145% and 125%, while the EU and Canada have interrupted an action in the process of negotiations in progress.
The report describes three probable trajectories: continuous confrontation with China, a complex confrontation with the EU and measured negotiations with most of the others. Canada should adopt a firmer position under its current government.
United States Perspectives
American GDP is expected to increase by 0.9% in annual sliding in the fourth quarter of 2025. Interior demand will crawl below 1% throughout the year. Basic CPI inflation will reach 4.0%, with a basic PCE at 3.6%. The Fed should reduce the rates of 50 BPS in 2025, but should be cautious with persistent inflationary pressures.
Mixed resilience of Europe
The growth of the euro zone will slow down 0.2% per year until 2026, with the most affected Germany and Italy. The American tariffs targeted on steel, cars and pharmaceutical products could cost the region 0.4% in cumulative GDP. Budgetary stimulation of infrastructure and defense could help amuse the blow, and growth should bounce over potential in 2027-2028. The ECB is expected to reduce rates again in June, followed by a break.
Asia-Pacific struck the hardest
China growth forecasts are revised at 3.5% in 2025 and 3% in 2026, exports to the United States should fall by more than 5% in 2025 and more than 6% in 2026. Support for domestic policy should partially compensate for the drop in investment and consumption. Elsewhere in Asia-Pacific, higher prices and the reduction of Chinese demand will weigh heavily on export-oriented economies.
Outlook emerging markets
Most emerging markets, with the exception of Mexico, are relatively isolated due to limited direct exposure and smaller American commercial surpluses. Central banks in Latin America and other EM regions should reduce rates more aggressively, helped by higher currencies and the drop in oil prices, which should help reduce inflation.
