S&P Global — 10 February 2025
Daily Update: February 10, 2025
Trade War Victory May Prove Elusive
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
Trade wars can often be counterproductive to the countries involved. While getting tough on trade tends to be politically popular, higher prices and lower exports are less so. Trade wars are often won by the country more capable of enduring higher prices and lower productivity. Victory in a trade war is relative, not absolute.
Tariffs and protectionism are enjoying renewed popularity, in part due to the harm globalism has wrought for industries and communities around the world. In the US, tariffs and the threat of tariffs have become a core element of diplomacy under the Trump administration. The effectiveness of this approach requires potential trading partners to feel considerable uncertainty about the US administration’s policy intentions. However, this policy uncertainty also creates difficulty for businesses and investors. Investing in factories, energy and trading infrastructure requires confidence that supply chains and access to foreign markets will remain predictable and consistent.
Economists at S&P Global Ratings found that the potential effects of the tariffs are overwhelmingly negative, including slower GDP growth, higher unemployment and inflation, and a stronger US dollar. The uncertainty around US policy has complicated long-term decision-making by companies and households. According to the economists, the negative impact on the US will be smaller than that on its trading partners, making the country a likely relative winner in a prolonged trade war.
According to Satyam Panday, chief economist for the US and Canada at S&P Global Ratings, the US is likely to experience a one-time 0.5%-0.7% rise in consumer prices, assuming tariffs against Canada, Mexico and China are implemented and remain throughout 2025. This would lead to US real GDP growth over the next 12 months being 0.6% lower than previously forecast. In this environment, the Federal Reserve would be likely to pause its rate-cutting cycle, leading to higher borrowing costs for companies and households. US consumers would see only about a 1% decrease in after-tax income, but tariffs would weigh on business investment in ways that are difficult to predict. The lower relative impact of a trade war for the US is due to the country’s low share of imports as a percentage of total consumer spending of only about 11%.
In Canada and Mexico, GDP growth is expected to be 2%-3% lower than previously forecast. The effects of the 10% additional tariffs on Chinese goods would slow the country’s GDP growth to about 4% for 2025 and 2026. Should the US administration implement tariffs on the eurozone, the reduction in the region’s GDP growth would likely be equal to that of the US’. However, the relative strength of the US economy may allow it to weather the negative impacts of trade war with Europe more effectively than eurozone countries.
Today is Monday, February 10, 2025, and here is today’s essential intelligence.
Listen: EnergyCents | Balancing Act: Germany Wrestles with Decarbonizing, Manufacturing Ambitions
Germany grew to become Europe's largest economy on the back of an export-led manufacturing sector. The energy-hungry economy is now trying to maintain its competitiveness after losing access to Russian gas pipeline imports in 2022, phasing out its nuclear capacity in 2023, and retiring its coal-fired power fleet by 2038. S&P Global expert Daniel Muir joins EnergyCents with hosts Hill Vaden and Sam Humphreys to discuss Germany's challenge to reinvigorate its economy while meeting decarbonization goals through a changing mix of energy supply.
—Listen and subscribe to the podcast from S&P Global Commodity Insights
Economic Research: Macro Effects of Proposed US Tariffs are Negative All-Around
The Trump administration has moved quickly to propose a new 25% tariff on goods imported from Canada and Mexico, and an additional 10% tariff on goods imported from China. Last-minute negotiations resulted in a one-month reprieve for both North American trading partners. The S&P Global Ratings economics team — in its first high level estimates — found the potential effects of the tariffs are overwhelmingly negative, including slower GDP growth, higher unemployment and inflation and a stronger US dollar. The effects on the US are smaller than for trading partners.
—Read the article from S&P Global Ratings
Private Debt's Share of Buyout Financing Hits Decade High
Private debt accounted for 77% of global leveraged buyout financing in 2024, its highest annual share since at least 2015, according to Preqin data. Banks funded the remaining 23%, their lowest share over the same period. Private debt's dominance has continued into 2025, financing 83% of the 53 leveraged buyouts announced up until Jan. 22.
—Read the article from S&P Global Market Intelligence
How US Tariffs Could Impact the MENA Region
The Middle East and North Africa (MENA) region has not been cited so far as a focus for the new US administration’s actions regarding trade tariffs. It remains exposed to the imposition of general global US tariffs and to the indirect economic consequences of trade measures imposed on other geographic areas.
—Read the article from S&P Global Market Intelligence
Oil Key Priority as India Prepares Energy Demand Roadmap
India's role in global oil markets is poised for rapid expansion in the foreseeable future, as demand growth is expected to keep its uptrend while many other leading consumers experience a slowdown. Asia's second-biggest economy is projected to achieve a relatively faster growth rate in oil demand of 3.2%, compared to China's 1.7%, according to S&P Global Commodity Insights.
—Read the article from S&P Global Commodity Insights
SME IT Spending Strategies for 2025 Driven by AI Adoption
In 2024, IT spending showed a consistent positive trajectory, marking a significant rebound from the previous year's challenges. This optimism is reflected in Tech Demand Indicator scores of above 50 for the first three quarters in 2024, and a projected year-topping demand score of 53.38 in the fourth quarter, indicating not just steady demand for technology products and services in 2024, but also positive momentum heading into 2025. As organizations continue to navigate economic pressures, the strategic prioritization of technology investments, particularly in generative AI, will likely be pivotal in shaping the IT landscape in the coming year.
—Read the article from S&P Global Market Intelligence
AI in the Markets (New York City | Feb. 12, 2025)
In today’s rapidly evolving landscape, artificial intelligence is a transformative force revolutionizing business, the economy and society. The disruption created by AI and generative AI presents an opportunity for leaders to drive innovation and solidify their position on AI’s opportunities and risks. Join us for a half-day event offering a balanced look at AI’s complexity. AI in the Markets will provide you with best practices, peer experiences and industry-leading research and insights on the impacts of AI. After AI in the Markets, you’re re invited to join S&P Global and IBM for a fascinating session on Quantum Computing: Opportunities, Risks and Implications for Enterprises.
—Register for the in-person event from S&P Global