Tariffs, geopolitical tensions and climate risks are fuelling market volatility and challenging business operation, profit margins and growth potential. Economic outlook is uncertain, with unstable prices and fractured trade. Managing risks and building resilience are now imperative, while agile pricing actions and innovation are key to unlocking new opportunities. Targeting high-growing emerging markets can boost volume and diversify supply chains.
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The global economy is slowing down, while outlook is highly uncertain, facing various risks stemming from Trump policies, geopolitical shifts and climate disruptions. Escalation of tariffs and trade war could send the US economy into recession, while cutting global real GDP growth by 2.3 percentage points (p.p.) in 2025-2026 from the baseline. Economies are hit differently by tariffs and geopolitical disruptions, with trade-dependent countries witnessing significant headwinds.
Global trade is disrupted by ongoing geopolitical tensions and shifts in US trade policy, forcing companies to reevaluate their supply chains. In the worst-case tariff scenario, the cost of imported B2B components and commodities in the US could surge by 20%. Rerouting of exports to avoid tariffs, reshoring and diversifying are among measures companies are taking in response.
Lower energy prices and weakening demand since the beginning of 2025 help dampen inflationary pressures. However, high tariffs and supply chain dislocation are threatening a resurgence of prices, particularly in the US. Geopolitical tensions and climate change add volatility to commodity prices, highlighting the necessity to mitigate supply risks and adapt agile pricing models. A hike in commodity prices could increase global inflation by 1.0 p.p. in 2025.
Despite some trade challenges, India and Southeast Asian economies will remain the world’s fastest-growing economies in 2025-2026, creating growth potential for global businesses. The rewiring of global production networks will also benefit these economies, thanks to their competitive business environments and growing consumer markets.
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