“Overall, the global economy continues to exhibit considerable resilience amid heightened policy and geopolitical uncertainty. This resilience is underpinned by supportive financial conditions, robust household and corporate balance sheets, the promise of an AI-driven productivity boost, and low energy prices, among other factors,” says Luigi Speranza, Head of Markets 360 and Chief Economist.
Overall, the global economy continues to exhibit considerable resilience amid heightened policy and geopolitical uncertainty. This resilience is underpinned by supportive financial conditions, robust household and corporate balance sheets, the promise of an AI-driven productivity boost, and low energy prices, among other factors.
Luigi Speranza, Head of Markets 360 and Chief Economist
To be sure, for Markets 360, higher tariffs and lingering trade uncertainty will likely continue to weigh on the global economy in the coming months. They consider that Southeast Asia and Switzerland will feel hardest hit and that the US–EU trade deal is less disadvantageous for the EU than it appears on the surface. But with 60% of US imports now covered by trade deals or existing arrangements such as the US–Mexico–Canada Agreement, uncertainty has likely peaked. The team therefore views the current weakening in activity as a temporary soft patch rather than a more enduring trend.
US
The US exemplifies this global narrative. The labour market has weakened considerably over the past few months, but Markets 360 thinks this mostly reflects policy uncertainty. As uncertainty recedes, the team expects labour market weakness to follow suit, a view supported by the recent uptick in sentiment indicators.
Markets 360 attributes the relatively modest price impact of higher tariffs so far largely to lag effects. With the labour market still near full employment, inflation is likely to consistently exceed the Fed’s target. In an environment of elevated inflation and modest labour slack, a cautious policy approach would be typical, but they expect political pressure on the Fed to drive a sustained focus on employment over inflation, prioritising growth over price stability.
Eurozone
In Markets 360’s view, export frontloading early in the year masked an uncertainty-driven mid-year slowdown that is still unfolding in the eurozone. However, the team remains confident that this will set the stage for a reacceleration to above-trend growth in 2026, so they nudge up their already above-consensus GDP growth forecast for next year.
A pivotal factor in this forecast is the fiscal stimulus in Germany, coupled with the team’s belief that there will be spillovers to the broader eurozone economy from higher defence and infrastructure spending. Deregulation efforts and measures to deepen and integrate EU capital markets more effectively could complement the fiscal boost. These might include steps towards more common debt issuance and the creation of a truly eurozone-wide safe asset.
China
Growth remains sluggish and deflation is set to persist, in Markets 360’s view. But with the official 5.0% GDP growth target within reach, the analysts think the administration’s incentives for an aggressive policy response are limited.
Japan
Markets 360 now expects the Bank of Japan to resume hiking in December rather than October. While inflation remains well above target, recent communication from the BoJ suggests it remains concerned about the impact of US tariffs. Softening US jobs market data and increased uncertainty over domestic politics will also likely add to the BoJ’s caution for the time being.
However, the team continues to expect the Japanese economy to weather the impact of the US tariff hikes, helped by fiscal policy, which is likely to remain loose under the hung parliament.
UK
Markets 360 sees the UK economy continuing to muddle along, as the impact of monetary easing is likely to be offset by fiscal consolidation. Budgetary challenges persist, although the analysts expect these to be tackled head on at the autumn budget with additional fiscal consolidation measures. While they forecast this will weigh on growth, it should help to assuage fiscal concerns.
Emerging Markets
In Markets 360’s view, the heterogeneity of US tariff policy should result in a differentiated growth performance across emerging markets. EM Asia looks to be the most negatively (and directly) exposed, with growth momentum likely to ‘catch down’ into Q4 2025, particularly for those economies in Southeast Asia that have so far benefited from front-loaded exports to the US.
Indirect growth drags from US tariffs could also become more apparent in CEEMEA, particularly for those countries that are already running negative output gaps. Most Latam economies seem more insulated from US tariff policy; rather, the analysts think domestic fiscal policy risks and political developments (elections) into 2026 will garner more attention for some (Brazil and Colombia) at the turn of the year.
Markets 360 anticipates continued disinflation and monetary easing should remain well entrenched in EM Asia and CEEMEA markets but remain more nuanced in Latam, where several economies still face stubborn services price inertia.
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