04/07/2025

The recent US tariff offensive has shaken the foundations of global trade. The Trump administration has introduced a new package that includes a universal tariff of 10% and “reciprocal” surcharges of up to 50% on goods from 57 countries. In doing so, it is not only redefining U.S. trade policy but also openly challenging the framework of globalization as we knew it. At first glance, the message is clear and aggressive: America wants to compete from a position of strength.

However, it would be a mistake to assume that this scenario will remain unchanged. Beyond the dramatic rhetoric surrounding these measures, what is emerging is a negotiating strategy based on pressure, aimed at reshaping bilateral relations in a way that is more favorable to the United States. In light of these developments, it’s essential to look beyond the immediate distractions and examine the potential paths of this protectionist shift and its implications for growth, inflation, and global macroeconomic stability.

The economic impact of the new tariffs can be assessed through two main channels. The first is the economic activity channel, whereby the rising costs of imported goods negatively affect investment and consumption, particularly in manufacturing and export sectors. The second is the inflationary channel, which is clearly evident in the United States: as the costs of imported products increase, they create upward pressure on domestic prices at a time when inflation was already struggling to decline.

This economic shock is compounded by a significant degree of uncertainty, which hampers investment decisions, distorts expectations, and exacerbates financial volatility. Ultimately, the real impact will depend on whether these measures are solidified or if they instead serve as a catalyst for renegotiating the trade order. Considering these factors, it is worthwhile to explore various possible scenarios.

In a baseline scenario, which we consider the most likely, the tariff conflict does not vanish but rather evolves. Following the initial impact, a phase of bilateral negotiations begins, enabling certain strategic partners to secure exemptions or partial reductions. While the multilateral framework remains weakened, it does not collapse entirely. Global trade experiences partial fragmentation without resulting in a widespread breakdown. The global economy absorbs the shock and adapts.

In a more adverse scenario, the conflict prolongs and intensifies. The European Union expands its retaliation beyond tariffs, targeting technology and digital services sectors. Meanwhile, China responds with more aggressive trade and financial measures. Global value chains are significantly disrupted, leading to a reconfiguration of international trade into blocs. As a result, global growth suffers across the board. In this situation, inflation coexists with weak aggregate demand, further complicating the efforts of central banks. Financial markets react with additional corrections.

That said, while the negative scenario makes sense from an economic perspective, its likelihood of occurring is low—perhaps even very low—because it is politically unacceptable to the parties involved. The internal economic cost would be too high for Trump, and even more so for his trading partners, who stand to lose significantly more in this conflict. Although some world leaders might be tempted to leverage the idea of an external enemy for political gain, the absence of economic rationality is striking.

Finally, in an optimistic scenario, the tariff measures emerge as a short-term tactical move aimed at reinforcing the Trump administration's image of strength. After the initial impact, a rapid and negotiated de-escalation takes place, involving technical adjustments, strategic exemptions, and the initiation of bilateral talks. Trade relations become more rationalized, and while globalization does not return to its former state, it stabilizes at a new equilibrium. The world economy quickly regains momentum, and central banks are able to clearly resume their monetary normalization strategies. Inflation begins to ease, and the markets respond positively to the resolution of the conflict.

We believe that the baseline scenario will prevail, resulting in limited, short-term damage to the economy. The final situation will differ from the initial one, but it will not lead to a complete reconfiguration of global trade. In fact, it may even pave the way for a more relaxed tariff environment between the United States and certain trading partners, potentially including the EU. The coming weeks will be crucial for clarifying these scenarios and addressing the current lack of visibility.

As we conclude a week that will be recorded in history, globalization, rather than having come to an end, is entering a more uncertain, tense, and political phase. Trade is shifting from a space of technical consensus to a geostrategic battleground.