Global Economy Faces Slowdown in Second Half of 2025 Amid Tariffs and Trade War Tensions

Strategic Insights -

The global economy is expected to experience a slowdown in the second half of 2025 due to the impact of tariffs imposed on the United States' trading partners, according to CGS International Securities Malaysia Sdn Bhd. While China has been hit the hardest, other US allies such as Canada, Mexico, and the European Union have also suffered negative effects. In contrast, US producers have frontloaded their purchases and piled up inventory in anticipation of a trade war, benefiting export-oriented ASEAN economies.

Key Takeaways:

  • The US tariffs imposed on its trading partners have impacted all economic actors, leading to a slowdown in the global economy in the second half of 2025.
  • While China has been hit the hardest, other US allies such as Canada, Mexico, and the European Union have also suffered negative effects.
  • US producers have frontloaded their purchases and piled up inventory in anticipation of a trade war, benefiting export-oriented ASEAN economies.
  • The ASEAN-4 nations - Indonesia, Malaysia, Singapore, and Thailand - will likely lose some key growth momentum without the support from the US frontloading.
  • CGS MY has cut Indonesia's 2025 GDP growth forecast to 4.8% from 5.0% and maintains Singapore's GDP growth at 1.6%.
  • Thailand's GDP growth is forecast to be 2.0% in 2025, amidst dull sentiment on consumption, ongoing political turmoil, and risks from Trump's reciprocal tariffs.
  • China may flood its products elsewhere, pricing out ASEAN producers, driven by the loss of the US market.
  • Key to watch is the US bilateral talks with ASEAN countries on reciprocal tariffs, which may lead to agreements to reduce US-ASEAN trade imbalance and imply supply chain restructuring.

Statistics:

  • The global economy is expected to face a slowdown in the second half of 2025.
  • Indonesia's 2025 GDP growth forecast has been cut to 4.8% from 5.0%.
  • Singapore's GDP growth remains at 1.6% in 2025.
  • Thailand's GDP growth is forecast to be 2.0% in 2025.
  • US producers have frontloaded their purchases and piled up inventory in anticipation of a trade war.

Sources:

  • BERNAMA News Agency, July 7, 2025
  • Research note by CGS International Securities Malaysia Sdn Bhd (CGS MY)