Mint Explainer | Why Trump’s tariffs have not crippled the global economy yet
Fears that US president Donald Trump's tariffs would sink the global economy have so far proven exaggerated, thanks to exemptions, deals and shifting trade patterns.
In April, after US president Donald Trump unveiled the so-called ‘liberation day’ tariffs, fears of a global trade collapse and a looming recession were widespread. Six months on, those fears have largely proved unfounded.
Mint explains why Trump’s tariffs have not hurt the global economy as feared.
How has the global economy fared post-Trump’s tariffs?
Much better than expected. In July, the International Monetary Fund (IMF) pegged its 2025 global economic growth forecast at 3%, around 20 basis points higher than its April forecast. Inflation is expected to remain benign at 4.2%.
Data from the World Trade Organization (WTO) released on 7 October show that global merchandise trade grew 4.9% in volume terms and 6% in dollar terms in the first half of 2025. The WTO has consequently revised its 2025 merchandise trade growth forecast sharply upward to 2.4%, from an earlier estimate of 0.9%.
What contributed to this surprising resilience?
Several factors helped soften the impact. Most countries targeted by Trump’s tariffs avoided retaliatory measures, preventing a collapse of the world trade order. Many negotiated deals with the US that lowered tariffs.
In addition, the US tariffs included numerous carve-outs and exemptions, meaning the effective average tariff rate fell from 30% in April to around 18% today. Other tailwinds—massive front-loading of imports into the US, strong growth in emerging economies, favourable macroeconomic conditions and increased artificial intelligence (AI)-related spending—further supported stronger-than-expected growth despite high tariffs.
What about the US economy?
Experts had predicted runaway inflation and a possible recession. That has not materialized.
The US economy grew 3.8% in the second quarter (April–June), above the 3.3% most experts had estimated. Inflation, though creeping up, remains under control at 2.9% in August. Consumer spending is robust, stock markets are bullish and corporate investment remains strong.
How have the tariffs impacted China’s exports?
Contrary to expectations, China—the world’s manufacturing hub—has managed to limit the impact.
Exports rose 8.3% in dollar terms in September, up from 4.4% in August, marking the fastest growth in six months. Exports to the US, however, fell 27% year-on-year despite a pause in the triple-digit tariffs both sides had imposed. China has compensated by expanding shipments to the European Union, Southeast Asia and Africa.
Where does India stand?
India continues to be the world’s fastest-growing large economy. In the first quarter of 2025-26, GDP grew 7.8%; second-quarter growth is expected around 7%, and the Reserve Bank of India projects 6.8% growth for 2025-26.
Growth is primarily driven by public investment and domestic consumption. The 50% US tariff on Indian goods is likely to shave about 60 basis points off growth, prompting the government to accelerate trade negotiations with the EU and the US.
Is the world out of the woods?
Not entirely. The IMF has warned of downside risks from persistent high tariffs, elevated uncertainty and geopolitical tensions. Global growth in its upcoming World Economic Outlook is expected to be trimmed slightly. Signs of slowing are emerging in the US, where the job market is cooling, unemployment is rising, and inflation is climbing.
China’s economy remains sluggish, with weak domestic demand, and Europe faces similar challenges. With Trump recently threatening a 100% tariff on Chinese imports, another round of trade tensions appears imminent between the world’s two largest economies.
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