Swiss Re expects global economic momentum to weaken in the second half of 2025, citing ongoing trade policy uncertainty and the effects of elevated tariffs between the United States and China.
In its latest economic and financial risk outlook, the reinsurer projects US GDP growth of 1.5% for 2025, following a first-quarter contraction of -0.3% influenced by trade-related distortions.
According to Swiss Re, a 90-day tariff de-escalation agreement between the US and China has helped stabilize shipping volumes, with a rebound observed in May after a subdued April. Despite this, the baseline scenario maintains an effective tariff rate of 15%, and future sector-specific adjustments remain under discussion.
The reinsurer also notes that prior frontloading activity in the euro area supported first-quarter growth – particularly in Ireland – though policy uncertainty is expected to weigh on output.
Swiss Re now forecasts euro area GDP growth at 0.8% for 2025, while China’s outlook stands at 4.7%, slightly constrained by ongoing trade tensions.
Swiss Re said the inflation outlook varies sharply across regions. US inflation is expected to average 3% in 2025, unchanged from the prior year, as tariffs continue to exert upward pressure on prices. Conversely, inflation in other regions may ease due to currency appreciation against the dollar.
Swiss Re noted that the broader global economy remains exposed to downside risks if tariff negotiations falter. A failure to reach lasting trade agreements could lead to a sharper-than-expected slowdown not currently priced into financial markets. US bond yields, while slightly lower than earlier in the year, remain elevated.
The US dollar has weakened by 5% since the start of the year as investors turn to alternative safe-haven assets, including gold and the Swiss franc. Swiss Re cautioned that persistent trade uncertainty may tighten funding markets, increase liquidity pressures, and force potential intervention by the Federal Reserve.
Swiss Re CFO Anders Malmström previously indicated that the reinsurance sector is beginning to enter a softening cycle, with net price reductions averaging 1.5% year-to-date. While the market remains fundamentally attractive, signs of declining pricing power may influence profitability and underwriting decisions in the near term.
Social inflation remains a challenge for reinsurers, according to Swiss Re. The reinsurer reported that US liability claims have increased by 57% over the past decade, with a noticeable rise in "nuclear verdicts" – jury awards exceeding US$10 million. These developments have added pressure on loss ratios and are being closely monitored across the sector.
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