Economic context
April 2, 2025 will remain in economics and finance textbooks as a landmark date. This "Liberation Day", which was supposed to be historic, turned out to be an economic and financial debacle. The tariffs initially announced were clearly amateurish, with potentially devastating consequences for the US economy, whose growth has already been revised downwards. The credibility of D. Trump and his team was severely damaged and, in the two days following Liberation Day, investors showed their distrust to the point of pushing D. Trump to suspend the bulk of the new tariffs for 90 days, on the very day they were due to come into force and revert to the initial rate of 10%.
Even so, the impact of current tariffs on the US economy will be substantial. U.S. growth would be revised downwards to just +1% in 2025, and PCE inflation would be 3.4% year-on-year, based on a scenario with +15% average tariffs. However, this does not take into account the negative consequences of tighter financial conditions (widening credit spreads, rising long-term interest rates, falling equity markets, etc.), nor the cost of uncertainty, which is reflected in falling consumer confidence and business leaders' wait-and-see attitude during this period.
In Europe, business momentum was picking up, particularly in Germany and France, but the impact of customs duties could still be consequent.
Since the United States is one of our main trading partners, exports representing 3% of the zone's GDP. Growth should be revised downwards from -0.3% to -0.6% in 2025, impacted by customs duties, but will remain positive (between +0.5% and +0.8%) due in particular to the various stimulus plans.
Before China's prohibitive tariffs, the beginnings of a recovery were confirmed. But the current level of tariffs could reduce growth by around one percentage point this year, to c. +4%. Faced with this trade war, China has powerful arguments at its disposal to bend D. Trump beyond reciprocal tariffs. Indeed, a devaluation of the Yuan would partly erase the impact of the tariffs, as S. Bessent has clearly understood. And let's not forget that China remains the main buyer of US Treasury bonds. If China stopped participating in Treasury auctions, or worse, started selling US debt, US long rates could rise significantly.
Central Banks
