Osservatorio | May 2025
The new tariff U-turn leaves deep uncertainty.
At a glance:
Markets turn optimistic, but consumers and businesses remain cautious.
From the draft agreement with the UK and the deal with China, it is clear that tariffs will be diversified, starting at a minimum of 10%; to collect the $600 billion included in the proposed U.S. federal budget, the average rate would need to be around 18%.
The effects will impact trade flows, growth, and inflation. These effects are asymmetric between the U.S. and the rest of the world.
In the coming months, demand will weaken, partly due to the early purchases by U.S. households and companies. Global foreign orders for manufactured goods are already declining.
U.S. inflation will rise by as much as three percentage points, while it will tend to fall in the Eurozone and elsewhere.
U.S. interest rates will remain high, while they will decline in Europe. The dollar will stay fragile.
Meetings with Asian portfolio managers reveal a growing awareness that the risk premium is being pushed upward by major global shifts underway.
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