Press release
Global Focus 2025 – Reverberations
Bracing for the US election fallout
London – Standard Chartered (“the Bank”) expects global economic growth to be broadly flat in 2025, slowing slightly to 3.1% from 3.2% in 2024. Support from looser financial conditions and expansionary fiscal policy may be partly offset by protectionist trade policies and still-high interest rates in the US and elsewhere.
The global economy is bracing for the fallout from the US election. The clean sweep for President-elect Trump and the Republican party gives them a clear mandate to implement their policies, including significant tariffs on key US trading partners, including China. Trump’s pro-growth and protectionist policies are likely to be inflationary for the US, with consequences for the rest of the world. On the geopolitical front, Trump has said that he would end the wars in Ukraine and the Middle East, which would have far-reaching consequences globally.
The US economy has been consistently strong for the past few years, supported by consumption and services. Market calls for a US recession triggered by high interest rates proved unfounded. The Bank expects a growth moderation in 2025 as a softer labour market and wage growth cap consumer spending, but the economy is still on a sound footing.
By contrast, the euro-area economy continues to struggle. Germany and France, the region’s largest economies, risk slipping into recession. Renewed US tariffs on the EU would further weaken the region’s already-fragile economy. Exports are a primary growth engine, and the manufacturing sector has already been under pressure in recent years from elevated energy costs, weak demand, and greater competition from abroad. The Russia-Ukraine situation is another source of risk for Europe, as the potential reduction of US support for Ukraine would place a greater burden on the region. Given limited fiscal space, these pressures may force the ECB to move even faster on rate cuts than expected, widening the interest rate differential with the US.
China is likely to bear the brunt of US tariff policy. The authorities prepared for the potential fallout by delivering additional stimulus to support the domestic economy in September, aiming to boost growth in late 2024 and early 2025. In a worst-case scenario of 60% US tariffs on all imports from China, the Bank expects further stimulus focused more on consumption than investment. Net exports contributed significantly to China’s growth in 2024 but are expected to decline substantially in 2025 and while the PBoC is expected to keep monetary policy loose, expansionary fiscal policy will be the biggest source of support for 2025 growth, with China’s economy expected to grow 4.5% next year.
Elsewhere across Asia, the Bank expects growth in ASEAN and India to slow slightly in 2025 versus 2024 because of monetary tightening and the moderating economic outlook for key trade partners – namely the US, the euro area and China. That said, growth in the region should remain healthy.
Despite concerns about the energy sector, the Bank expects the GCC to remain a bright spot for global growth in 2025, with the region’s non-oil growth exceeding overall global economic growth. Investment in the non-oil sector will continue to drive economic activity in 2025, while lower interest rates should benefit interest rate-sensitive sectors in Saudi Arabia, the UAE and Qatar. While the regional conflict has had a material negative economic impact on the broader MENA region (particularly Egypt and Lebanon), the GCC is likely to remain relatively insulated from geopolitical risk.
Kaushik Rudra, Global Head, Fixed Income Research & Head, Asia Research, said: “The US economy is set to moderate in 2025, after a resilient 2024 performance despite elevated interest rates and we differ from consensus in that we expect the Fed to cut policy rates faster than the market is pricing in for 2025. While the euro area continues to struggle, Asia is relatively healthy, although growth at the regional level is set to moderate slightly.
“For the UK, we expect stronger growth in 2025, but there is considerable uncertainty on the pass-through of budget measures and Trump’s tariff approach to the UK; there is no guarantee the UK will avoid US protectionist measures and as such we hold a below-consensus growth forecast of 1.3% for 2025.”
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For further information please contact:
Shaun Gamble
Group Media Relations
Standard Chartered
+44 7766 443662