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China - That 2018 (tariff) feeling – What’s different in 2025?
Just as growth momentum is showing some signs of recovery as we near the end of 2024 , an expected rise in US tariffs under Trump 2.0 will create more drags to GDP growth in 2025. We assume a bigger tariff shock compared to 2018-19, with build-up to an average rate of 45%. But China is now less dependent on the US, has developed a playbook to react, and will add stimulus. We expect annual growth to slow from 4.9% in 2024 to 4.3% (was 4.5%) in 2025 and 4.2% in 2026.
US - A bull entered the China shop
The US economy showed remarkable resilience in the face of very restrictive rates. It is however increasingly showing cracks, with weakening consumption and labour market. Uncertainty about future policy is large, as is the range of potential outcomes.
Germany - Elections and Trump tariffs shape the path ahead
The economy is expected to return to sluggish growth, expanding by 0.7% in 25 and 0.8% in 26. Rising real incomes and falling interest rates mean growth will be driven by domestic demand. Trump tariffs the biggest downside risk: they are likely to hit German exports from H2 2025 onwards. Disinflationary trend to continue, but high wage growth is keeping core inflation elevated. With elections on 23 February, a new government may not be in place before mid-2025. Depending on the election outcome, a step up in fiscal spending is likely given the CDU’s turn.
The Netherlands - Domestic strength to face turbulent times
The economy has showed robust growth over the past year; growth is expected to continue in 2025. But with a precarious external environment, growth will be domestically driven. Unemployment will increase slightly, but the tight labour market remains a constraining factor. Inflation still at 2.5% in 2026, higher than the eurozone, creating risks to competitiveness.
Eurozone - Trump tariffs push ECB beyond neutral
The recovery is continuing for now, with growth to average 0.8% in 2024, and 1.2% in 2025, but the economy is likely to slow later in 2025 on new US tariffs, to 0.1-0.2% q/q. Domestic demand increasingly picking up the growth baton; consumers benefit from real income gains. Labour demand in the eurozone is softening, but the overall labour market remains resilient. The eurozone fiscal stance is neutral in 2025, but France faces significant fiscal tightening. Disinflation remains on track; tariffs lead to inflation persistently below target inflation in 2026. This prompts the ECB to extend its rate cut cycle to a low of 1% in 2026.
Special - We need to talk about China…
(I) Reliance on China might be the least-worst of all options by Sandra Phlippen. (II) China’s growth impact on Europe – Supply hits even more than demand by Arjen van Dijkhuizen
Global Outlook 2025 - The year of the tariff
The return of president Trump is likely to mean a significant rise in US import tariffs in 2025. China will bear the brunt, but Europe will also be hit, leading to a sharp slowdown later in the year. Tariffs threaten the nascent recoveries in domestic demand in the eurozone and China, while in the US, deregulation and tax cuts will help blunt the real income shock from tariff rises. Inflation in the US is expected to reaccelerate, but to fall below the 2% target in the eurozone. All of this is likely to drive a divergence in Fed & ECB policy, with slower and fewer Fed rate cuts, and the ECB deposit rate falling to 1%. This will push the euro to parity vs the dollar in the course of 2025.
The week ahead - 25 - 29 November 2024
These are the Key Macro Events for the upcoming week.
Key views Global Outlook 2025
The return of president Trump to the White House is likely to mean a significant rise in US import tariffs in 2025. China will bear the brunt, but Europe will also be hit. Global trade and growth will initially benefit from a frontloading ahead of the tariff rises, before slowing sharply later in 2025. Against this backdrop, domestic demand is recovering in the eurozone and China, helped by falling interest rates and targeted fiscal measures in China, while in the US, deregulation and tax cuts will help blunt the real income shock from tariff rises. Inflation in the US is expected to reaccelerate, but to fall below target in the eurozone. All of this is likely to drive a divergence in Fed & ECB policy, with slower and fewer Fed rate cuts, and the ECB deposit rate ultimately falling to 1%. This is expected to push the euro towards parity against the dollar in the course of 2025.
ESG Economist - Five climate challenges in Dutch climate sectors
This analysis shows that the emission reduction trend in sectors in the post-Paris period (2017-2023) would not – if it continued – lead to achieving the 2030 target. Indeed, following the post-Paris period trend in GHG emissions, the 2030 emissions reduction target (55% below 1990 level) will not be achieved, with a 5% gap. The recent analysis by the Netherlands Environmental Assessment Agency (PBL) even suggests that on the basis of current policies the post-Paris emission reduction trend will slow for many sectors.