US triggers chain reaction of crisis: Global economy at risk
Photo: Trump could plunge the world into economic recession for the third time since the beginning of the 21st century (Getty Images)
The economic storm is gaining strength: the new US tariffs could be the beginning of a global recession, destroying trillions of dollars in global trade, reports Axios.
It takes a really huge shock to plunge the entire global economy into recession. There have been two such events since World War II: the financial crisis of 2008-2009 and the COVID-19 pandemic of 2020.
President Donald Trump's “Liberation Day” tariffs could be the third such economic earthquake in 17 years.
The last 75 years of globalization have created a complex network of interdependent economies, explaining “when the United States sneezes, Latin America catches pneumonia.”
If the US tariffs cause the major US trading partners to slide into recession, it will sharply reduce US exports - $2.1 trillion in goods last year, plus another $1.1 trillion in services. And that's even before these partners begin to impose retaliatory tariffs.
“This is a game changer for the global economy. Many countries will likely end up in a recession,” Fitch economist Olu Sonola wrote.
Others agree with him. “These policies, if sustained, would likely push the US and global economy into recession this year,” JPMorgan analysts say.
The first reaction of the markets
Global stocks fell sharply after Trump's announcement, but not as much as if they believed that these tariffs would be fully implemented and remain in force.
Tariffs on imports from China are particularly punitive. China exports many high-tech goods, such as iPhones, but it is also the engine that provides affordable goods to millions of low-income families in financial distress. Thus, the Chinese tariff alone could lead to a significant increase in poverty.
In 2024, the United States imported $3.3 trillion worth of goods, which is more than $25,000 per household.
According to Evercore, if the new tariffs average 29%, US importers will have to pay about $1 trillion a year in tariffs, or $7,300 per household.
In reality, this will never happen - many goods will simply stop being imported, leading to shortages and a significant increase in prices. If US imports decline, it will remove a key driver of global economic growth, especially for export-dependent countries like Germany and China.
“One lesson from the first few months of the Trump presidency is that you have to let news cure a little before you take it seriously,” Matthew Hougan, Chief Investment Officer at Bitwise Asset Management, told Axios.
US President Donald Trump announced a 10% basic tariff on imports, as well as much higher tariffs for some trading partners, especially in Asia. Particularly, 34% tariff for China, 24% for Japan, 46% for Vietnam, and 25% for South Korea. The European Union has a 20% tariff.
