Economic context
The moment of reckoning is approaching for the global economy. So far, activity has absorbed the shock of tariffs and Trump's constant reversals on the issue rather well (Chart #1).
In this respect, US growth has done more than hold up, and confidence seems to be returning. The job market is showing some resilience, with private sector job creation exceeding expectations and the unemployment rate falling to 4.1%. But upon closer inspection, all is not so rosy. Job creation is mainly coming from the public sector, while private employment is showing signs of slowing, and the decline in the unemployment rate is partly linked to migrant deportations. Inflation, for its part, is not a concern for the moment, and its main components are trending downward. The tariffs are expected to have only a transitory effect on prices, mainly during the second half of the year. Finally, let's note the approval of Donald Trump's Big Beautiful Bill, which will partially support American growth at the cost of a significant shift in the trajectory of American debt #2).
In Europe, growth remains modest, and the currently anticipated scenario for US tariffs is emerging around a universal rate of 10%, to which specific amounts are added depending on the sector (steel and aluminium, automobiles, pharmaceuticals). In this scenario, the consequences for European growth are relatively limited, but a higher rate of 30%, as Donald Trump is again threatening, would lead to stagnation in European growth. European activity should also be supported by the decline in inflation, a consequence of lower energy prices. Real wage growth should finally support the decline in the savings rate in the second half of the year. Similarly, sentiment indicators are recovering. Combined with the recovery in lending, consumption and investment should in turn contribute to the European recovery (#3).
In China, the recovery remains timid, even though consumption is benefiting from the state aid recently distributed to citizens. The country remains subject to deflationary forces, particularly due to competition between companies, a competition that the government would like to reduce. Finally, the government is once again considering supporting the economy through yet another stimulus package worth around $200 billion to boost consumption and counter the impact of US tariffs.
