The US is approaching a presidential election in November 2024. The outcome of the election will shape the country’s future fiscal, monetary and trade policies, which will in turn influence the growth trajectory of the world’s largest economy, while having spillover effects globally.
Euromonitor International constantly evaluates economic risks and simulates potential economic shocks, helping businesses to see beyond uncertainties and prepare contingency plans.
Growth momentum falters in the US and stagnates globally in the baseline outlook
While the upcoming election adds uncertainty, regardless of the election results, the US economy is expected to see lower growth in 2025, as both consumer spending and the labour market are slowing down. Although the Federal Reserve (Fed) has started to cut interest rates in September 2024, the still-high interest rates will weigh on economic activity in the short and medium term.
The US economy is predicted to expand by 1.7% in real terms in 2025, down from estimated 2.3% growth in 2024
Source: Euromonitor International’s Q3 2024 baseline forecasts
Our baseline for 2025 assumes a continuation of the status quo of the US economy which is likely the case if Vice President Kamala Harris wins the election.
Higher risk of a global fragmentation if Trump wins
However, in the event of a Trump victory in the US November election, one of the major changes expected will be a further shift in the country’s global trade policy. Donald Trump proposes an “America-first” trade agenda that includes setting universal baseline tariffs of 10-20% on a majority of foreign goods as well as a 4-year plan to phase out Chinese imports of key goods. Such abrupt shifts in the US trade policy could lead to an escalation of trade conflicts, particularly among the US and China, while serving as a catalyst for economies to further divide into geopolitical blocks leading to a more fragmented global economy.
A deeper fragmentation of the global economy is captured in Euromonitor International’s Global Fragmentation scenario. The scenario assumes a 10% increase in global real import prices, while a decline in global trade will result in higher commodity prices and a decline in private sector confidence. It is currently assigned a probability of 15-25% over a 1-year horizon.
Under the Global Fragmentation scenario, real GDP growth in the US could be slashed by 0.4 percentage points in 2025, and further by 0.5 percentage points in 2026 compared to the baseline, as a result of reduced market access and higher import costs due to reciprocal trade restrictions imposed by other countries.
Intensified trade tensions with increased tariffs and protectionism measures, as in a global fragmentation scenario, will also drag on the growth potential globally, as it will make it difficult for economies and companies to compete in the global marketplace. Consequently, businesses may face higher costs and limited market access, while consumers may experience higher prices and reduced choice. Nevertheless, the level of the impacts varies as it depends on the country’s exposure to global trade and commodity prices.
Trade-dependent economies are more vulnerable to global fragmentation risk
Given their higher exposure to the global market, trade-dependent economies like Singapore and Hong Kong are likely to see the greatest negative outcome in case there is a deepened economic fragmentation. With exports of goods and services accounting for 174% of its total GDP in 2023, Singapore is highly vulnerable to a disruption in the global supply chains and fluctuations in demand from its main trading partners including China and the US.
For Eurozone economies, the potential impact of an increase in global trade tensions would differ across countries. Export- and resource-dependent countries such as Hungary, the Netherlands and Belgium are likely to be hit harder by higher tariffs and trade barriers, while France and Italy are more resilient thanks to their relatively large domestic markets.
A second Trump presidency would be a major downside risk for China’s economy, given the higher and broader tariffs to be imposed on Chinese goods if Trump wins
Source: Euromonitor International
Under this scenario, China’s essential exports, from electronics to EVs to steel to pharmaceuticals, would be hit hard by trade restrictions from the US and other Western countries. More restricted access to Western technology would also hinder China’s technological advancement and productivity growth. Should a Global Fragmentation scenario materialise in Q1 2025, real GDP growth in China could be reduced by 0.5 percentage points in both 2025 and 2026.
Read our briefing, Global Risks 2024 and Beyond, for more analysis on global risk scenarios and its potential impacts on economies.