Sluggish global growth will hit the US, Europe and China this year before rebounding next year, according to an analysis from CRU.
Veronika Akhmadieva, senior economist at CRU, said there was a loss of confidence in the US economy since the tariff regime had been imposed, with inflation concerns rising in the world’s biggest economy.
“The multiple u-turns make it very difficult for businesses to plan and to make decisions around hiring and investment,” she told attendees at the World Aluminium Summit, adding: “US consumers are more concerned about inflation than in 2022.”
The CRU had expected lower global growth before tariffs had been implemented, but now expected “even more significant damage in the industrial sector” with global growth at around 0.7% lower than initially forecast.
She said: “In terms of the US, the tariffs that have already been implemented will have a significant negative impact on the American economy, [so] we expect inflation there to increase to about 4% by the year end. This is happening at a time when the US consumer is already overstretched.
“We expect the US economy to lose around 1.5% of projected 2025 growth, but we do think we will see some recovery from 2026 onwards [which is] because tariffs provide some incentive to produce more in the US.”
However, she pointed out that onshoring and reshoring “will take time”.
She said: “In the short run, demand destruction and supply chain disruption will dominate the US outlook.”
Europe was “a mixed picture” according to Akhmadieva, with the EU economy beating expectations by expanding 0.4% in the first quarter this year. Consumer spending was also growing and industrial production was “also expanding in early 2025” she said.
Nonetheless, along with the drag from US tariffs, key sectors like manufacturing and construction “were still struggling”, she noted, and the services sector “is losing momentum”.
She said: “We expect the European economy to decelerate sharply over the next six months.”
She added that exposure to tariffs also depended on what a country exported to the US, so Germany had greater exposure to tariffs than the rest of the EU because of its auto exports.
Asian countries were also “most exposed” to tariffs, especially China. However, the ’90-day pause’ in tariff escalation left China with 30% tariffs on its goods into the US and the US with 10% tariffs on goods from China.
China is expected to announce additional stimulus measures later this year, and will attempt to spend its way out of the crisis, reaching around 5% growth in 2025.
She said: “We expect to see higher spending on infrastructure, urban developments and monetary stimulus measures, such as lower rates.”
Akhmadieva forecast that consumer durables trading and equipment upgrade programmes will stimulate “spending on equipment on appliances and vehicles, leading to stronger retail sales and public investment”.
She said the effect of such fiscal spending and monetarist stimulus measures will “unlock private consumption in China” and there was likely to be more in 2025.
In addition, there is also likely to be “trade diversion effects, such as an increase in transhipments and processing via third countries”.
She concluded: “Overall, we think these measures will be successful, though not perfect, so the Chinese economy will expand just under 5% this year.”
