Fitch Ratings has warned that the global economy is heading for a slowdown, largely driven by what it describes as the most significant trade conflict since the 1930s. The ongoing tariff dispute between the US and China continues to disrupt international markets and weigh heavily on business and consumer confidence worldwide.

The agency recently revised its outlook for US tariffs, lowering the estimated effective rate from 27% to 14.2%. This comes after President Trump scaled back some of his aggressive trade policies. However, Fitch maintains a cautious stance, highlighting that the overall economic picture remains fragile due to the erratic nature of recent US trade decisions.

In early 2025, uncertainty around tariffs led US businesses and consumers to increase imports in anticipation of further price hikes, causing a sharp rise in inventories. While consumer prices have so far remained stable, early signs of inflation are emerging in the form of higher producer costs and survey-based price pressure indicators.

Financial markets have also been unsettled, with Fitch noting increased equity volatility, a weaker dollar, and rising long-term US government bond yields.

Despite these challenges, there are some tentative signs of recovery. The easing of US-China tensions has led to modest upgrades in global growth forecasts. Fitch now expects the US economy to grow by 1.5% in 2025 (up from 1.2%), China by 4.2% (up from 3.9%), and the eurozone by 0.8% (up from 0.6%).

Still, inflationary risks persist — not least due to volatile oil prices, which are projected to average $70 per barrel this year. Fitch cautions that these pressures could further complicate global recovery efforts.

As the situation evolves, businesses and investors alike will need to remain agile and closely monitor international trade developments.

This article is for general information only and does not constitute financial or tax advice. Professional advice should be taken based on your specific circumstances.