Trump 2.0
and Its Impact on the
Global Economy in 2025

Major Institutions’ World Economic Outlook

The global economic growth rate for 2025 is projected to remain at just above 3%. Positive effects are expected from disinflation and monetary easing, especially in major countries, while manufacturing, particularly in the IT sector, is expected to improve. However, growth is unlikely to meet expectations due to the uncertainties surrounding Donald Trump’s reelection. The foundation of a US centric global economy has already been laid by the Biden administration’s decoupling policies, and if Trump’s America First agenda is fully implemented, American dominance of the global economic order is expected to solidify in extreme forms. This will likely result in significant economic shocks and global instability.

Trump’s Major Campaign Pledges

Trump 2.0: Major Upward and Downward Risks

The core of Trump’s secondterm policies, as revealed through his campaign promises, lies in strong protectionism and America First principles. Domestically, tax cuts (1-5% reduction in corporate taxes) and stricter immigration controls are expected, while globally, a 10-20% universal tariff on all imports and a 60% tariff on China will be implemented. Security concerns may also lead to trade restrictions on goods containing critical Chinese technologies or components.
Furthermore, Trump aims to increase US energy exports by revitalizing traditional energy production and has hinted at the possibility of scrapping the Inflation Reduction Act (IRA), creating a sense of crisis for South Korea’s car manufacturers. However, experts suggest that instead of fully abolishing the IRA, it is more likely that US companies will benefit first, while foreign companies will see reduced advantages. These measures are expected to be quickly implemented within the first 100 days of Trump’s presidency, as the primary goal is to offset the loss of tax revenue through tariffs. With little time to prepare for such rapid changes, global economic chaos and early trade conflicts are highly probable.
Trump’s policies could disrupt not only global trade but also the pivoting actions of major central banks. The Federal Reserve, following two interest rate cuts in September and November 2024, has reduced the federal funds rate by 0.75% to 4.75%. Similarly, the European Central Bank (ECB) has already proactively lowered rates. The Bank of Korea has also reduced its base rate from 3.50% to 3.00%. However, the tax cuts, tariffs, and expansionary fiscal policies under Trump’s administration could fuel inflation, forcing the Federal Reserve to reconsider raising interest rates again as the effects of these policies materialize. This would increase the uncertainty surrounding monetary policies. Adam Posen, president of the Peterson Institute for International Economics (PIIE), suggested at an FKI conference that the Federal Reserve might halt its rate cuts and consider raising rates six times or more in 2025.
While the downward risks are more prominent, noteworthy upward risks also exist. The rapid acceleration of artificial intelligence (AI) development is expected to have a massive impact across financial, healthcare, and industrial sectors, as well as everyday life. The continued growth of AI industries is forecasted to boost productivity and improve the global manufacturing economy.
Meanwhile, the heightened uncertainty caused by Trump is expected to disrupt the global economy. However, certain policies, such as tax cuts and deregulation, may serve as limited positive factors for the global economy over time, potentially boosting corporate investment sentiment and household consumption.

Interest Rate Trends in Major Economies

Impact on Global Trade: Focus on the US Trade Surplus Countries (China, Canada, Mexico)

Trump’s protectionist policies, which emphasize America First, will have uneven effects on global trade. The most significant attention is on China, the largest US trade surplus country. After starting a trade war over intellectual property issues during his first term, Trump plans to impose 60% tariffs on China, exacerbating China’s ongoing economic difficulties, including real estate stagnation and local government debt issues. Goldman Sachs predicts that these trade sanctions could reduce China’s growth by 0.7% in 2025, warning that the largescale government stimulus may fail to deliver results.
Other countries with large trade surpluses with the United States, such as Canada and Mexico, are also expected to face higher levels of sanctions. Canada and Mexico, as close neighbors, benefited from the North American Free Trade Agreement (NAFTA), which created a large economic bloc by combining US capital and technology, Canada’s resources, and Mexico’s cheap labor. However, under Trump, these countries are likely to face increased sanctions. Trump has already announced that he will impose a 25% tariff on all goods from Mexico and Canada from the first executive order on January 20, 2025.
Other major economies will also be affected by Trump’s trade policies, though the impact will vary. The intensity of trade sanctions may differ depending on negotiations with the United States, and countries in direct competition with China and other targeted nations may use these sanctions as an opportunity.

Major US Trade Deficit Partners