Economists from international organizations and financial institutions are sounding the alarm about potential policy changes in the US that could negatively impact the global economy.
With the impending transition of the US government, President-elect Donald Trump's proposed fiscal and trade policies have injected uncertainty into next year's interest rate strategies. According to a recent report by Singaporean newspaper Lianhe Zaobao, the market widely expects these policies to hinder the anticipated rate cut process.
Morgan Stanley economists have issued an outlook noting that the shift in power in Washington, coupled with expectations of a hawkish trade stance, is likely to dampen consumer spending in the coming years.
\"The outcome of the US election is going to usher in policy changes with implications that will reverberate through the global economy,\" stated Seth Carpenter, Morgan Stanley's Chief Global Economist.
Carpenter further explained that the first round of tariffs from the new administration is expected to primarily target imports from the Chinese mainland, followed by a gradual expansion to goods from other countries. As businesses pass on increased costs to consumers through higher prices, inflation is projected to rise in the latter half of 2025, leading to reduced consumer spending and subsequently affecting production and employment.
Adding to the conversation, Goldman Sachs Research forecasted last month that the average annual global GDP growth rate for 2025 will be 2.7 percent, slightly above the consensus forecast of economists surveyed by Bloomberg.
While there has been optimism surrounding global economic growth due to the alleviation of inflation over the past two years, Goldman Sachs Chief Economist Jan Hatzius warns that US trade policies could introduce economic headwinds to other regions. \"The biggest risk is a large across-the-board tariff, which would likely hit growth hard,\" Hatzius wrote.
