April was marked by the announcement of the tariffs imposed by the United States on its trading partners and the impact they had on the stock markets. On 2 April 2025, US president Donald Trump announced the imposition of a general 10% tariff on all global imports, albeit with certain exceptions. A few days later, he added new tariffs specific to each country, based on their bilateral trade deficits with the United States, the most aggressive decision in international trade since the Great Depression.

The announcement triggered a major reaction in the financial markets, with widespread selling and a spike in volatility, amid fears that the measures would lead to an economic slowdown combined with rising prices. In view of the criticism received and the instability that was generated, Trump partially rectified and decreed a 90-day pause in the application of the so-called “reciprocal tariffs”, although he maintained the universal 10% rate. Since the start of the exemption period, the United States has initiated talks with other countries with the aim of negotiating bilateral trade agreements; in some cases these have already been reached, allowing the stock markets to recover their losses.

The downside risks to US growth have increased

The tariffs announced on 2 April 2025 have raised the effective rate to 21.5%.

➩ We hope that some of these tariffs form a negotiating strategy and that they will be partially reversed (certain countries have already negotiated lower ones, including the United Kingdom and China).

➩ We anticipate that some products that are currently exempt, such as semiconductors, pharmaceutical goods and copper, will ultimately be taxed in the coming months.

This would raise the final effective tariff rate to around 17.5%, constituting a 15% increase, close to the most adverse scenario.

The impact on growth will be significantly negative, causing real GDP growth to fall below 1 %.

Sources: Goldman Sachs

As a reflection of the impact on growth, a 0.11%-0.12% fall in the GDP is estimated for each additional tariff point. The above, combined with other negative growth measures (such as the DOGE policies and the more restrictive immigration policies) has led to us reducing our real US GDP growth forecast for this year to 0.50%. The main impact of these policies on growth is expected to occur in the fourth quarter of 2025.

Implications for inflation and monetary policy

United States

The tariff increases will have a 1.5-point impact  on underlying inflation, which will end the year at between 3.5% and 4%, compared with the previous figure of 2.5%.

The impact will be more concentrated at the beginning, with prices increasing in the period of two to three months following their implementation. The main risk will come from the second-round effects, which are threatening to upset the medium-term expectations.

Surveys such as the one conducted by the University of Michigan show expectations of 6.5% inflation over one year and between 3.5% and 4% over five years, worrying levels for the Fed. Although the market is yet to reflect this risk, the Fed may have to delay or limit its cuts. We still expect two or three cuts, but, if a recession materialises, the Fed could apply a 200-basis-point reduction.

Europe

In Europe, the impact of the tariffs will be more moderate and potentially disinflationary, due to the redirection of trade from the US.

The ECB could continue to position its rates as low as 1.5%-1.75%.

Labour market and potential recession scenarios

The US labour market remains strong, with unemployment standing at 4.2% and 150,000 jobs being created each month.

There are no clear signs of mass lay-offs or a sharp fall in recruitment.

Potential scenarios

If growth weakens, the unemployment rate could rise to 4.7%, which would be a manageable figure. Any increases above this threshold would be grounds for more aggressive action by the Fed.

Job offers and resignation rates appear to be stabilising

Sources: Goldman Sachs

Impact on China

The impact of the tariffs on China will be a fall totalling between 1.5 and 2 percentage points, with its expected growth standing at 4% this year and 3.5% in 2026.

It isn’t sustainable to maintain such high tariffs, as they will paralyse trade between the world’s two largest economies. For the time being, they have agreed to reduce the tariffs for 90 days:

• Chinese imports will now pay 30% (vs. 145%)
• US imports will pay 10% (vs. 125%)

The Chinese authorities will use their fiscal and monetary policies to stimulate domestic demand, given the downside risks to external demand.