Economic Buzz: OPEC says global economy continues to exhibit healthy underlying dynamics despite trade-related uncertainties

The Organization of Petroleum Exporting Countries or OPEC stated in a latest monthly update that global economy continues to exhibit healthy underlying dynamics despite trade-related uncertainties. Confidence levels have begun to recover across major economies following the 90-day pause on US reciprocal tariffs and the provisional trade agreement between the US and China. Private consumption and monthly retail sales data indicate sustained consumer spending, which is expected to continue as trade-related clarity improves. However, uncertainty has not been fully resolved. Thus far, only the UK has finalised a trade agreement with the US, while Japan, the EU, China, and other major partners remain in talks. Against this backdrop, trade uncertainty shaped much of the 1Q25 economic growth figures. A slight contraction in the US and strong growth in China were both influenced by front-loading ahead of tariffs, which weighed on quarterly growth in the US while supporting it in China. Non-OECD economies continued to record solid economic growth over this period.

OPEC noted that trade-related uncertainties are expected to gradually normalise over the remainder of 2025. The 90-day agreement between the US and China signalled a willingness on both sides to adopt a more de-escalatory stance, while the US–UK trade deal highlighted the potential for further bilateral agreements. Nevertheless, risks of renewed tensions remain. The US decision to raise tariffs on steel and aluminium to 50% renews concerns of trade tensions, particularly within North America. At the same time, China’s restrictions on rare earth mineral exports have added to broader uncertainty. While the US is expected to finalise trade agreements with key partners – including the EU, Japan, and South Korea – by year-end, most deals are unlikely to be concluded before the reciprocal tariff pause expires in early July, or in China’s case, before the mid-August expiry of its 90-day arrangement. The structure of recent deals and ongoing negotiations points to a US trade policy centred on a global 10% tariff baseline, with higher tariff rates on China and continued sector-specific tariffs on steel, aluminium, and automobiles.

Despite these uncertainties, economic fundamentals remain resilient, with private consumption continuing to support growth across major economies. Fiscal and monetary measures will continue to counter-balance some of the trade-related slowdown. These include investment in infrastructure in Germany, consumption support in China, and proposed US tax cut extensions. Monetary policy is expected to remain accommodative across most advanced economies, except Japan, where further tightening is likely in 2H25. Brazil and Russia are also expected to maintain restrictive stances amid persistent inflationary pressures.

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