Global | The impact of trade tariffs on the global economy

Summary

The impact of tariffs is computed through the calculation of effective tariffs under different scenarios and simulations based on distinct methodologies. If the current tariffs remain broadly unchanged, global growth could initially fall between 0.2pp and 0.5pp, and potentially more over the medium term.

Key points

• Key points:
• Assuming the current tariffs remain broadly unchanged, global growth could initially decline by around 0.2pp considering only direct trade effects, and by approximately 0.5pp when considering potential indirect effects via uncertainty, confidence, financial and other channels.
• Simulations show that the overall effects could intensify over the medium term— the global GDP level could fall by more than 2 percentage points—mainly if tariff shocks are not mitigated and structural pressures (such as inefficiencies, productivity losses, erosion of trade institutions and global value chains) become entrenched and exert additional drag.
• The impact of tariffs is potentially large in countries most exposed to US tariff measures and/or most dependent on US exports. Still, the US economy could be the most significantly affected country as the adverse effects of its own tariffs will add to the impact of retaliatory measures from trade partners.
• Global trade flows could fall by 4% to 9%, while US exports and imports could shrink by 12% to 31%, depending on the tariff scenario. Trade flows could collapse entirely if tariffs approach or exceed 60%.
• Countries imposing higher tariffs—such as the US—may see a temporary improvement in trade balance. However, our results show these gains dissipate within a few years, and the overall impact in GDP tends to be negative.

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