Uncertainty over the US-driven trade war risks spilling over and depressing consumer sentiment and financial markets, a new report has warned, with a severe impact on global growth.
In a new report ahead of President Trump’sself-proclaimed “Liberation Day” next Wednesday, Oxford Economics have examined the impact of high uncertainty over tariffs.
Their work shows that prolonged tariff uncertainty would lower global GDP by 0.7% to 1.7% by 2028, but that hit would be larger – knocking up to 2.4% off the world economy – if financial markets and consumer sentiment were also depressed.
The report says:
“The recent US stock market correction appears to have been partially triggered by investors realising that Trump may follow through with his tariff threats and that this will hurt the US economy. Similarly, consumer sentiment has weakened due to tariff-induced inflation fears.”
“Should continuing policy uncertainty depress financial markets and consumer sentiment more severely, above and beyond the recent US stock market correction, we estimate the drop in global GDP would be significantly larger – ranging from -1.1% to -2.4% in 2028.”
