Global economic uncertainty is on the rise after the United States’ imposition of sweeping new tariffs, with Peak Re, a Hong Kong-based reinsurer, projecting a potential dip in global GDP growth to below 2 per cent in 2025, down from 3 per cent in 2024. ​

The US has introduced a universal 10 per cent tariff on all imports, along with sector-specific duties targeting vehicles, steel and aluminium.

While “reciprocal tariffs” on approximately 60 countries have been paused, sectors such as semiconductors, pharmaceuticals, copper and lumber remain under review. If fully enforced, these measures would bring US import tariffs to their highest level since the 1930s.​

Peak Re, in its latest insights report, notes that these tariffs act as both demand and supply shocks globally. Key drivers of global growth, such as US consumer spending and emerging markets, could weaken under pressure from higher import prices and inflation.

The US consumer, accounting for 80 per cent of the nation's growth in 2024, is likely to see reduced purchasing power, which could have substantial repercussions given the US contributes about 30 per cent to global consumption. ​

A review by the US International Trade Commission of the 2018 tariffs indicated that American consumers and businesses bore the brunt of higher prices, with minimal effect on foreign export prices.

The present tariff hike is more aggressive, potentially lowering US GDP by 1 per cent, China’s by 2.5 per cent and the eurozone's by between 0.3 per cent and 0.5 per cent, according to initial estimates. ​

The International Monetary Fund has also raised concerns, warning in its Global Financial Stability Report, issued on Tuesday, that the tariffs are fuelling an uncertain global economic outlook.

Economists at Goldman Sachs have echoed these concerns, suggesting a higher likelihood of a global recession, in a report issued on Monday.

In response to the economic turbulence, global economies are turning to fiscal policy to support domestic demand.

In March, Germany announced a €500 billion stimulus focused on infrastructure, while the European Union plans to raise defence spending by €650 billion over four years.

China, which sends 15 per cent of its exports to the US, according to the Peak Re report, is reacting with a domestic stimulus, outlining a record-high fiscal deficit of 4 per cent of GDP in 2025. Targeted support will go to consumer goods, infrastructure, real estate and debt servicing. ​

The situation remains fluid, with Scott Bessent, the US Treasury Secretary, indicating this week that the trade war with China is unsustainable and anticipating a de-escalation.

The Associated Press has reported that formal negotiations have not yet begun. ​