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HomeBusinessUBS Slashes Global Growth Forecast Amid Trump’s Tariff Escalation

UBS Slashes Global Growth Forecast Amid Trump’s Tariff Escalation

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UBS strategists have once again dialed back their global growth outlook, citing President Trump’s sweeping tariffs as the primary drag. In their latest revision, they see the MSCI AC World GDP expansion slowing more sharply over the next two years than previously anticipated.

Growth Outlook Rewritten

Global GDP: Forecast for 2025 cut to 2.5% (from 2.9%), with a further slowdown to 2.3% in 2026.

U.S. Output: Now seen at 1.5% growth in 2025 (vs. 2.0% prior) and plunging to 0.8% in 2026 (down from 1.8%).

Inflation Divergence: The U.S. is expected to see a sharp rise in consumer prices, while most other economies avoid widespread inflation due to limited tariff retaliation and stable currencies.

Tariff Shock and Trade-War Costs

China as Central Target: Up to 145% reciprocal tariffs on Chinese imports—and 125% Chinese counter-duties—have reversed earlier growth benefits.

Broader Levies: Universal 10% duties plus separate taxes on aluminum, steel, and autos.

Tariff Value: Total tariffs now cover roughly $780 billion of trade.

Earnings and Profitability Risks

Corporate Margins: UBS warns that companies “lack the pricing power” to fully offset higher input costs, squeezing profit margins.

GDP–EPS Link: Historically, each 1% drop in global GDP cuts global EPS by about 8%, with U.S. firms especially vulnerable.

The Uncertainty Factor

Modeling Challenges: “Substantial uncertainty surrounds all these numbers,” the strategists admit—after three forecast revisions in just two weeks.

Scenario Planning: UBS emphasizes the need to prepare for outcomes ranging from deep tariff persistence to partial trade détente.

What Investors Can Do

Position for Slower Growth: Shift toward defensive sectors—Consumer Staples, Utilities, and Health Care—better able to withstand margin pressures.

Monitor Trade Signals: Track tariff negotiations and exceptions that could alleviate supply-chain costs.

Watch GDP and CPI Releases: Stay updated on global growth and inflation trends to recalibrate allocations.

Track Upcoming Economic Data
To stay on top of crucial GDP, inflation, and trade-policy announcements, use the? Economics Calendar – Economics Data APIfrom Financial Modeling Prep.This tool provides real-time scheduling and historical context for the macro indicators shaping these growth forecasts.

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