GLOBAL ECONOMIC OUTLOOK
Presenting the Q2 2025 edition of the Scotia Wealth Management quarterly report featuring our global perspectives and regional insights on the economy and market outlook.
THE RISING COST OF UNCERTAINTY
Uncertainty is here to stay, with the direction of U.S. economic and geopolitical policy now representing the greatest challenge to the global economy.
The early-April tariffs announcement from the White House took most, including us, by surprise in its aggressiveness, as did the massive tariff hike on China in the days that followed. Were these tariffs to last for several quarters, the U.S. economy may find itself fighting to stay in positive growth territory.
Aggressive U.S. trade actions and possible retaliation may impose significant economic costs to all involved, with consequential impacts on asset and commodity markets.
The U.S.’s latest tariffs salvo is estimated to result in a ~20 percentage point increase in the country’s effective tariff rate. Without a doubt, this will have implications in the form of higher prices, and weaker consumption and investment momentum.
Given the economic damage that long-lived tariffs may cause, there is reason to doubt that these may remain at their announced levels for a long period of time. This may be behind the recent 90-day reciprocal tariff pause on most of the U.S.’s trading partners, apart from China.
Canada and Mexico’s greater reliance on the U.S. economy places them at a higher risk from tariffs and a deeper U.S. slowdown Others, like the Eurozone and China, may have been motivated by U.S. policy to roll out bigger fiscal support measures at home that could partially offset tariff dangers, though public measures will likely fall short of making up the losses.