The "tariff storm" is coming, and the global economy is affected

The latest data showed that the US PPI rose 3.2 per cent year-on-year in February, below expectations of 3.3 per cent and the previous reading of 3.5 per cent. The US saw 220,000 new claims for unemployment benefits last week, also missing expectations. Key inflation data are in the "quiet before the storm" ahead of the impact of US President Donald Trump's tariff policies. Some argue that the US economy is heading for stagflation. Capital Economics, for example, forecasts US GDP growth of just under 2% in 2025 and inflation of between 3% and 3.5%. Other economists use the term "mild stagflation" to describe what could happen to the U.S. economy. Tariffs make imported goods more expensive, pushing up inflation. The new tariffs could cause US core inflation to rise by another 0.7 per cent. The Fed's rate cuts are aimed at stimulating the economy, but could lead to a weaker dollar, which in turn could push up the cost of imports. In addition, a rate cut could fuel inflation by causing wages to rise and energy prices to spike. Global trade uncertainties, manufacturing overcapacity and other issues have led to divergence in export prices and volumes, further affecting economic growth.

The arrival of the tariff storm will undoubtedly have a huge impact and impact on the global economy and other fields. First, the impact on import and export enterprises. The increase in tariffs will directly lead to the increase in the cost of export goods, because tariffs, as a trade barrier, will increase the import cost of goods. This may force exporters to re-evaluate their pricing strategies and may even lead to the loss of price competitiveness of some exports. An increase in tariffs may cause consumers in importing countries to buy less, as higher prices of goods reduce their willingness to buy. This will directly affect the order volume of export enterprises, which in turn affects their production plans and profitability. In the long run, some exporting companies may consider transferring production capacity to countries or regions with lower tariffs to reduce costs and remain competitive. But such a shift would require time and significant investment, and could be subject to new market risks and uncertainties. At the same time, higher tariffs will also increase the cost of imported goods, which will affect the profitability of importing companies. Especially for those companies that rely on imported raw materials or components, the increase in tariffs will directly increase their production costs. Changes in tariff policies can lead to instability in supply chains, as importers may need to find new suppliers or adjust procurement strategies. This will increase the operational risk and time cost of enterprises.

The second is the impact on international trade and economy, the increase of tariffs will directly lead to the increase of trade barriers, making international trade more difficult. This could lead to a reduction in the volume of international trade and affect the activity of the global economy. Tariffs tend to cause tensions among trading partners. Countries may take retaliatory tariff measures, leading to a reduction in international trade activity, the escalation of trade wars, and further aggravate the uncertainty of the global economy. That in turn affects the growth rate of the global economy. Especially for those countries that are highly dependent on international trade, their economic growth may be significantly affected. Tariffs could lead to higher prices for imported goods, which could push up domestic inflation. This will affect the purchasing power of consumers and adversely affect the domestic economy. A change in tariff policy could trigger turmoil in financial markets. Investors may be worried about the uncertainty of tariff policy, leading to volatility in financial markets such as stock and bond markets.

The third is the impact on the economy of import and export countries. For countries that rely on exports, the increase in tariffs will directly affect the competitiveness of their export goods, which may lead to a decrease in export volume, and then affect economic growth and employment. At the same time, importing countries may face pressure from higher prices of imported goods, which in turn affects the interests of domestic consumers and producers.

In summary, the impact of the tariff storm will bring many aspects of the impact, enterprises should actively respond to these challenges, through diversified markets, technological innovation and strengthen international cooperation to reduce the impact of tariff policies on enterprises. Countries should strengthen communication and cooperation to jointly deal with the challenges and uncertainties brought about by tariff policies.