The evolving international economic landscape is heavily influenced by tariffs imposed during the Trump administration, particularly affecting relations between the US, EU, and China.

As of mid-June 2025, the US has enacted a 10% universal tariff and proposed additional tariffs against several countries, resulting in significant market reactions, including stock market declines and a weakened dollar.

These tariffs have negatively impacted US economic activity, leading to a 0.1% GDP decline in the first quarter of 2025, with revised growth rates of 1.3% anticipated for both 2025 and 2026 due to expected stagnation.

In light of these economic challenges, inflation forecasts for the US have been adjusted downward, estimating a rate of 2.9% for 2025, influenced by lower energy costs and an overall economic slowdown.

Forecasts indicate that a 10% bilateral tariff will persist between the US and EU, while US-China tariffs are projected to escalate to 60% by the end of 2025, creating increased uncertainty around trade negotiations.

In response to these tariffs, China is attempting to pivot its trade towards other Asian countries, although domestic demand weaknesses are a concern, leading to slight downward revisions in growth forecasts for 2025 and 2026.

China's growth in the first quarter of 2025 was recorded at 1.2%, primarily driven by exports in anticipation of tariffs, but future growth is expected to weaken amid escalating trade tensions with the US.

In contrast, the EU has responded with a shift in fiscal policy, including Germany's approval of a 500 billion euro infrastructure plan and the European Commission's 800 billion euro Rearm Europe plan to boost defense spending.

Despite the challenges, the euro area experienced better-than-expected economic performance in the first quarter of 2025, leading to revised growth forecasts of 0.9% for the year, although 2026 forecasts have been revised downward to 1.1%.

The euro is predicted to appreciate about 8% against the dollar by the end of 2025, with oil prices expected to remain lower due to global supply concerns and risks associated with economic slowdown.