Fri Dec 13 01:03:51 UTC 2024: ## Trump’s Return to Power Clouds Global Economic Outlook, Warns S&P

**New Delhi** – S&P Global Ratings has projected 3% global economic growth in 2025, but cautioned that this forecast is clouded by significant uncertainty, primarily stemming from the return of Donald Trump to the US presidency. While the agency anticipates steady growth next year driven by factors like easing inflation and strong consumer spending in developed markets, geopolitical risks and regional divergences pose substantial challenges.

The report, “Global Credit Outlook 2025: Promise And Peril,” highlights the potential for a slower-than-expected decline in interest rates from current elevated levels and a slower-than-anticipated decrease in defaults, particularly among lower-rated borrowers. Lingering inflation, high borrowing costs, and increased geopolitical risks, especially rising protectionism, are cited as key headwinds.

The biggest threat, according to S&P, is the escalating geopolitical landscape. The ongoing war in Ukraine, Middle East conflicts, and domestic polarization in several countries could disrupt trade, roil financial markets, and strain government budgets.

However, the re-election of President Trump introduces a new level of uncertainty. His proposed tariffs on imported goods, including potentially sweeping levies on Chinese and North American products, are predicted to have significant inflationary effects in the short term, ultimately dragging down US GDP in the medium term. These policies could also accelerate the diversification of global supply chains away from China, leading to unknown winners and losers, increased supply chain complexities, and further inflationary pressures.

Furthermore, Trump’s potential withdrawal of military funding for Ukraine would add pressure on European governments. The report anticipates strained US-China trade relations, exacerbated by Europe’s countermeasures against Chinese state subsidies. This confluence of factors could disrupt central bank monetary policy plans and capital flows, particularly limiting emerging market central banks’ ability to ease monetary policy.

US corporations, especially those reliant on Chinese manufacturing for specialized components, will likely face profit squeezes due to higher input costs. The Asia-Pacific region, heavily dependent on exports, and China, already grappling with a property crisis, would also suffer under increased protectionist measures. In conclusion, S&P’s outlook underscores the significant risks to the global economy posed by both ongoing geopolitical instability and the unpredictable policies of a second Trump administration.

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