Investing.com - The impact of sweeping U.S. tariffs on growth is being felt only gradually, but should still contribute to a slowdown in global economic activity this year, according to analysts at Citi.
Despite warnings that U.S. President Donald Trump’s punishing -- and now largely delayed -- levies would dent output, the global economy has so far shown signs of "notable resilience", the analysts led by Nathan Sheets said in a note to clients.
Trump initially unveiled elevated tariffs on friends and foes alike in April, but later partially paused the measures as part of a bid to give White House negotiators more time to forge trade deals with dozens of individual countries. A separate postponement and lowering of tariffs on China was also announced earlier this month.
Still, universal 10% tariffs remain in effect, as well as duties on items like aluminum, steel, and auto parts. By some estimates, the effective U.S. tariff rate now stands at its highest level since the 1930s.
The Citi analysts noted that U.S. firms and consumers have recently rushed to purchase products before the imposition of the tariffs, helping provide an initial bulwark from a potentially sharp economic cooldown.
But, as the full effects of the duties possibly emerge over the next few months, demand could face a "double blow" of reduced purchasing power and a "pay back" from the pre-tariff buying spree, the Citi analysts argued.
"As such, we view the current period as still the ’calm before the storm’, and we expect growth in the second half of the year to weaken," the brokerage predicted.
Global growth was projected to come in at 2.3% this year, easing from 2.8% last year, Citi said. Developed economies are tipped to be hit "especially hard", with growth in these countries sliding to just above 1%.