In its latest insights report, Peak Re has warned that significant shifts in US trade and economic policy since early 2025 are creating heightened uncertainty for the global economy, signaling a departure from the cooperative trade order in place since the 1980s.
The US has introduced a universal 10% tariff on all imports and added sector-specific duties targeting automobiles, steel, and aluminum.
Though “reciprocal tariffs” on roughly 60 countries have been paused, sectors such as semiconductors, pharmaceuticals, copper, and lumber remain under review. If fully enforced, these measures would bring US import tariffs to their highest level since the 1930s.
Peak Re noted that the imposition of tariffs acts as both a demand and supply shock globally. Key drivers of global growth – US consumer spending and emerging markets – could weaken under pressure from higher import prices and inflation.
Consumer purchasing power in the US, which accounted for 80% of its growth in 2024, is likely to contract. With the US contributing about 30% to global consumption, the repercussions could be substantial.
A review by the US International Trade Commission of the 2018 tariffs showed that American consumers and businesses bore the brunt of higher prices, with minimal effect on foreign export prices. The current tariff hike is more aggressive, potentially lowering US GDP by 1%, China's by 2.5%, and the Eurozone's by 0.3%–0.5%, according to initial estimates.
Peak Re projects global GDP growth could fall below 2% in 2025, compared to 3% in 2024, increasing the risk of recession if trade tensions escalate.
The firm added that downstream effects are likely, as seen during the US-China trade war of 2018–19. Bilateral tariffs affected third-country suppliers and disrupted global supply chains, slowing business activity and consumer confidence.
Longer-term growth prospects also face pressure. The World Trade Organization estimates that prolonged US-China decoupling could reduce global trade by 2.4% and global GDP by 7% in the long term compared to a no-decoupling scenario.
Peak Re’s outlook includes expectations that US retail prices will rise further due to the new “liberation day” tariffs, potentially increasing personal consumption expenditure (PCE) inflation by 1.4–2.2 percentage points.
Domestic producers may also raise prices amid reduced foreign competition, as occurred in 2018, when US steel and aluminum prices rose by 5% and 10%, respectively.
Outside of global businesses and trade, a report from S&P noted that European re/insurers may face heightened financial pressure due to recent market volatility sparked by Trump’s tariff announcements.
Global equity and bond markets experienced a sharp decline following the announcements, with potential spillover effects on real estate, private equity, and private debt holdings – key asset classes for many insurers and reinsurers.
The downturn increases uncertainty regarding the market outlook and duration of any correction. While short-term asset value changes are typically reflected in quarterly financial reports, actual losses from investment portfolios tend to emerge over a six- to twelve-month period.
Global economies are turning to fiscal policy to support domestic demand. In the European Union, Germany has announced a €500 billion stimulus, equal to roughly 12% of GDP, focused on infrastructure, while the EU plans to raise defense spending by €650 billion over four years.
Although defense investments generally offer limited economic spillovers, infrastructure spending is expected to provide near-term growth support.
China, which sends 15% of its exports to the US, is responding with domestic stimulus. The government has outlined a record-high fiscal deficit of 4% of GDP in 2025, with targeted support for consumer goods, infrastructure, real estate, and debt servicing.
A 30-point plan includes trade-in incentives, subsidies, Hukou reform, and minimum wage adjustments. While recent data suggests a pickup in retail sales and investment, external demand headwinds may require continued policy action.
Peak Re observed that Asian emerging markets remain exposed due to their dependence on US exports and complex regional supply chains. Countries such as Vietnam, Malaysia, Thailand, and South Korea are particularly sensitive to US growth trends. Manufacturers are considering bifurcated supply chains to adapt to differentiated tariffs across markets, a shift that could reshape regional trade.
Capital-dependent emerging markets are also at risk. A slowdown in global growth and higher inflation could trigger risk aversion, leading to currency devaluations and potential debt defaults. Emerging Asia remains relatively stable due to lower debt levels, but other regions, including Latin America and countries such as Mongolia and Sri Lanka, face greater exposure.
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