2025-2026 Domestic and International Economic Outlook: World Economy in Transition Responding to Trump 2.0

Overview

A comprehensive economic forecast report published by Mizuho Research & Technologies on the "2025-2026 Domestic and International Economic Outlook". The report provides detailed analysis of economic trends in major countries and regions, focusing on the impact of the Trump 2.0 administration's tariff policies on the global economy. ## Key Points ### 1. Report Overview - **Publishing Institution**: Mizuho Research & Technologies, Research Department - **Publication Date**: June 30, 2025 - **Forecast Period**: 2025-2026 - **Central Theme**: World economy in transition responding to Trump 2.0 ### 2. Global Economic Outlook - **2025 Outlook**: - Global economic slowdown due to U.S. tariff increases - Growth rates declining across regions, starting with the U.S. as the epicenter - Reduced exports to the U.S. as the main constraining factor - **2026 Outlook**: - Return to cruising growth pace as tariff effects cycle through - Support from fiscal expansion in the U.S. and Europe - Gradual progress in global supply chain reorganization ### 3. U.S. Economic Outlook - **Economic Slowdown in Late 2025**: - Price increases from tariffs take effect first - Pressure on corporate cash flow and household real purchasing power - Personal consumption (70% of GDP) likely to weaken - **Monetary Policy**: - Fed balances inflation concerns with employment deterioration - Rate cuts to 3.25-3.50% through 2026 ### 4. European Economic Outlook - **2025 Challenges**: - Growth rate decline centered on manufacturing countries with high U.S. export dependence - Manufacturing sector hit by tariff impacts - **Policy Response**: - ECB expected to cut rates to 1.75% - Increased defense spending and infrastructure investment - Economic recovery expected from late 2025 to 2026 ### 5. Chinese Economic Outlook - **Growth Rate Deceleration**: - Partially offsetting U.S. export decline through export drives and third-country exports - Continued weak domestic demand remains a constraint - Achieving growth target around 5% will be difficult - **Spillover to Asia**: - Significant impact on countries with high U.S. export dependence like Vietnam - Influx of Chinese products displaced from U.S. market also a downward pressure ### 6. Japanese Economic Outlook - **FY2025 Stagnation Phase**: - Headwinds from tariff impacts - Non-manufacturing resilient due to cost reduction from lower oil prices - Wage increase momentum continues amid strong labor shortages - **Price Trends**: - Persistent high food prices and labor cost pass-through - Core inflation growth just under 2% through FY2026 - **Personal Consumption**: Gradual recovery continues, avoiding economic downturn ### 7. Bank of Japan Monetary Policy Outlook - **No Rate Hikes in 2025**: - Cautious stance to assess U.S. tariff impacts - **Rate Hike Resumption in 2026**: - After confirming wage increases in the high 4% range - Implementation after confirming inflation just under 2% - **Exchange Rate**: - Yen appreciation trend due to narrowing Japan-U.S. interest rate differential - Yen strengthening to high 130s per dollar by mid-2026 ### 8. Global Supply Chain Reorganization - **Manufacturing Return to U.S.**: Gradual progress - **New Market Development**: Acceleration of market development outside the U.S. - **Supply Chain Reconstruction**: Toward new systems premised on U.S. tariffs This report is an important document analyzing the comprehensive impact of the Trump administration's tariff policies on the global economy and presenting economic outlooks for major countries and regions. In particular, the impact on the Japanese economy, BOJ policy responses, and exchange rate outlook provide valuable guidance for corporate management and investment decisions.