What should we take away from this summer’s economic developments?

Broadly speaking, the economic outlook for the global economy at the beginning of September remains largely unchanged from that at the end of July: namely, an economy that, overall, continues to withstand the double blow of US tariffs and uncertainty. Our current scenario expects an average annual growth of 1.6% in the United States in 2025, followed by 1.5% in 2026 and 1.3% in the Eurozone for both years (after 2.8% and 0.8% respectively in 2024). So, while the pace of US growth is expected to remain higher than that of the Eurozone, the outlook is for a slowdown across the Atlantic. On the Eurozone side, however, signs of recovery, albeit tentative, tend to predominate, to the point where the Fed is ready to resume its rate cuts and the ECB is ready to halt them. However, there are still many risks to growth. This fall, heightened uncertainty over US “reciprocal” tariffs will remain a key issue. Political pressure on the Fed’s independence, new political and fiscal uncertainties in France, financial market leniency, and latent tensions in the bond markets will also need to be monitored.

Higher tariffs, renewed uncertainty

Among the latest developments to note on the US tariff policy front, we can mention, in chronological order, the conclusion of a deal between the United States and the European Union on July 27, which closes one chapter: while the damage has been successfully limited, the game is far from over. The same is true of the disclosure on August 1st by the US of their updated list of “reciprocal” tariffs. This new version has restored some visibility on the level of customs duties and confirmed a high overall landing point, while many issues remain unresolved.

And the slight improvement was quickly lost: on Friday, August 27, a US federal appeals court upheld the International Trade Tribunal’s ruling that “reciprocal” tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were illegal. The US administration has until October 14 to bring the case before the Supreme Court. In the meantime, the tariffs remain in place. If the Supreme Court confirms their illegality, a major part of Donald Trump’s economic policy would be called into question. However, the US president has said in previous statements that he is prepared to circumvent the problem by relying on other legal grounds.

What new combination of tariffs could this lead to? This is yet another factor of uncertainty to keep in mind. If the “reciprocal” tariffs were abandoned, this would reduce fears about growth and inflation but increase concerns about financing the budget deficit. A ruling against the tariffs would be politically favorable to Trump but damaging from an economic and institutional standpoint.

These considerations further complicate the monitoring and analysis of the impact of tariffs. One of the important questions to ask is how the additional costs will be shared (between US consumers and US and foreign companies). The outcome will determine the extent of the impact of tariffs, which is currently limited, on US inflation and global growth. The first signs of impact are visible on global trade, but overall, it is still showing resilience.

In part, this is not surprising, as the tariff shock only dates back a few months and the multitude of turnarounds, as well as uncertainty about the landing point, have encouraged a wait-and-see attitude. The full effects of the tariff shock are yet to come. August and September data should show clearer signs of this, impacted by the current tariff levels, which will be effective until at least mid-October. After that, it will depend on whether or not the tariffs remain in place while the Supreme Court reviews the case and issues its final ruling.

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