UBS strategists have revised their global growth predictions downward, attributing the slowdown primarily to President Trump’s sweeping tariffs. Their latest forecast predicts a more significant reduction in the MSCI AC World GDP growth rate over the next two years than previously expected.

Updated Growth Forecasts

• Global GDP: The 2025 forecast has been revised to 2.5% (down from 2.9%), with another dip to 2.3% for 2026.

• U.S. Economic Output: Expected growth in 2025 is now set at 1.5% (previously 2.0%) and projected to plummet to 0.8% in 2026 (a drop from 1.8%).

• Inflation Gaps: The U.S. anticipates a sharp increase in consumer prices, while other regions avoid widespread inflation due to stable currencies and limited retaliatory tariffs.

Tariff Impacts on Economic Growth

• China: Central Target of Tariffs: A significant rise in reciprocal tariffs on Chinese imports (up to 145%) has reversed earlier growth advantages.

• Broad Tariff Measures: Implementation of 10% duties, in addition to specific taxes on aluminum, steel, and automobiles.

• Tariff Scope: Current tariffs affect trade valued at approximately $780 billion.

Caveats on Earnings and Profitability

• Corporate Margins: UBS warns that many firms will lack enough pricing power to fully mitigate rising input expenses, squeezing profit margins.

• GDP-EPS Correlation: A 1% decline globally in GDP typically results in an 8% drop in global EPS, with U.S. companies being particularly susceptible.

Navigating Uncertainty

• Modeling Variability: UBS acknowledges the substantial uncertainty surrounding these forecasts after making three updates in two weeks.

• Preparation for Various Scenarios: The need for investors to strategize for outcomes ranging from persistent tariffs to partial easing in trade tensions is emphasized.

Investor Strategies

1. Emphasize Defensive Positions: Shift focus toward sectors like Consumer Staples, Utilities, and Health Care that can better navigate margin pressures.

2. Monitor Trade Situation: Pay attention to developments in tariff negotiations that could help bring down supply chain costs.

3. Keep an Eye on GDP and CPI Reports: Update investment allocations based on current global growth and inflation trends.

Track Critical Economic Data Upcoming

To stay informed about essential GDP, inflation, and trade policy updates, utilize the
Economics Calendar – Economics Data API
from Entreprenerdly.com. This resource provides in-depth scheduling and historical data regarding the macroeconomic factors impacting growth forecasts.