According to the latest forecast of the US Goldman Sachs Bank, in 2025, the world economy is expected to continue to recover steadily.
The US economy exceeds expectations, will the Eurozone fall behind?
The world is about to enter 2024 with an uncertain recovery of the global economy. The global economy has shown recovery in 2024, but there are still many challenges from geopolitical conflicts, the impact of climate change, and uneven growth in many countries.
According to the latest forecast of the US Goldman Sachs Bank, in 2025, the world economy is expected to continue to recover steadily. The global economy is set for another year of solid growth in 2025, according to a new report from Goldman Sachs’ research unit.
The US economy will outperform expectations, while the euro zone economy will lag as President-elect Donald Trump’s administration is expected to impose new tariffs, the bank’s economists said.
Global GDP is expected to grow 2.7% next year on an annualized basis, slightly faster than economists polled by Bloomberg and in line with the estimated growth in 2024.
US GDP is expected to grow 2.5% in 2025, well above Bloomberg’s forecast of 1.9%. The euro zone economy is expected to grow 0.8%.
Meanwhile, Goldman Sachs also commented that the global labor market has rebalanced, inflation continues to trend down and is currently within reach of central banks’ targets. Central banks also continue the process of cutting interest rates.
However, economists also emphasized that there will still be challenges for the world economy, in addition to traditional challenges from geopolitical conflicts and impacts from climate change, the biggest risk may be widespread tariffs from the new US administration, which could affect growth.
Impact from the new US administration’s trade policy
As the Goldman Sachs report emphasized, one of the issues of particular concern to the world economy next year is the trade policy of the US President-elect Donald Trump’s administration.
According to economists, the impact of these new policies is forecast to have little impact on the US economy and will be largely offset by other factors. Tariffs would have a modest impact on personal incomes, while the positive incentives from tax cuts, a more regulatory-friendly environment and increased “spirit” among businesses would dominate.
However, the new US trade policy is expected to have a larger impact outside the US.
For the euro area, increased trade policy uncertainty could reduce the region’s GDP by up to 0.5 percentage points or more if the US imposes broad-based tariffs. Meanwhile, the effects of the new US trade policy on China could be even more direct.
The world’s second-largest economy could face tariff increases of up to 60 percent and an average of 20 percent on all exports to the US. This is expected to reduce China’s growth by nearly 0.7 percentage points by 2025.
Risk of increased trade tensions
The new policies of the US administration also risk increasing trade tensions next year. This assessment was also shared by Professor Andreas Hauskrecht in an interview with VTV reporters.
“I think we have to look at the following. Under President-elect Donald Trump, tariffs are used as a policy tool, targeting specific countries. It’s China, Europe, Canada and others. So it’s a very specific target of countries in bilateral relations. Note that the Biden administration has not removed those tariffs. They’ve kept them. The Republicans have an economic view that they want to go back to the old model, where tariffs were the most important source of revenue,” said Professor Andreas Hauskrecht – Kelley School of Business, Indiana University, USA.
According to Professor Andreas Hauskrecht, this will affect all countries, not all countries in the same way, but all countries will at least face tariffs of 10 to 20% and there will be some such targets in the new administration of President-elect Trump. An example is that there were high tariffs on China and then the US bought from Vietnam. There was a trade diversion.
“Now, when everyone is subject to tariffs, there will be no trade diversion, because everyone’s prices are affected, especially with China. So we will see a continuation of the trade tensions that have spread. The geostrategic tensions between the US and China will continue and perhaps unfortunately get worse,” said Professor Andreas Hauskrecht.
It is clear that the health and relationships of the world’s major economies next year will also have impacts on other economies, including the Asia-Pacific region.
According to economists, new policies in the US next year may have a stronger impact on open economies in the region such as Taiwan (China), Thailand, Malaysia, Vietnam. However, regardless of tariffs, Goldman Sachs believes that there will still be a shift in some supply chains from China to Southeast Asia, India or Mexico.
