Article tags:
  • Macro economy

Global Outlook 2025 - The year of the tariff

The return of president Trump is likely to mean a significant rise in US import tariffs in 2025. China will bear the brunt, but Europe will also be hit, leading to a sharp slowdown later in the year. Tariffs threaten the nascent recoveries in domestic demand in the eurozone and China, while in the US, deregulation and tax cuts will help blunt the real income shock from tariff rises. Inflation in the US is expected to reaccelerate, but to fall below the 2% target in the eurozone. All of this is likely to drive a divergence in Fed & ECB policy, with slower and fewer Fed rate cuts, and the ECB deposit rate falling to 1%. This will push the euro to parity vs the dollar in the course of 2025.

Bill DivineyRogier QuaedvliegArjen van DijkhuizenSandra PhlippenAggie van HuisselingJan-Paul van de Kerke(+5)
Article tags:
  • Macro economy

Key views Global Outlook 2025

The return of president Trump to the White House is likely to mean a significant rise in US import tariffs in 2025. China will bear the brunt, but Europe will also be hit. Global trade and growth will initially benefit from a frontloading ahead of the tariff rises, before slowing sharply later in 2025. Against this backdrop, domestic demand is recovering in the eurozone and China, helped by falling interest rates and targeted fiscal measures in China, while in the US, deregulation and tax cuts will help blunt the real income shock from tariff rises. Inflation in the US is expected to reaccelerate, but to fall below target in the eurozone. All of this is likely to drive a divergence in Fed & ECB policy, with slower and fewer Fed rate cuts, and the ECB deposit rate ultimately falling to 1%. This is expected to push the euro towards parity against the dollar in the course of 2025.

Bill Diviney

Pioneering economics with financial transaction data

Our forecasts

Article tags:
  • Macro economy

Eurozone - Trump tariffs push ECB beyond neutral

The recovery is continuing for now, with growth to average 0.8% in 2024, and 1.2% in 2025, but the economy is likely to slow later in 2025 on new US tariffs, to 0.1-0.2% q/q. Domestic demand increasingly picking up the growth baton; consumers benefit from real income gains. Labour demand in the eurozone is softening, but the overall labour market remains resilient. The eurozone fiscal stance is neutral in 2025, but France faces significant fiscal tightening. Disinflation remains on track; tariffs lead to inflation persistently below target inflation in 2026. This prompts the ECB to extend its rate cut cycle to a low of 1% in 2026.

Jan-Paul van de KerkeBill Diviney(+1)
Article tags:
  • Macro economy

The Netherlands - Domestic strength to face turbulent times

The economy has showed robust growth over the past year; growth is expected to continue in 2025. But with a precarious external environment, growth will be domestically driven. Unemployment will increase slightly, but the tight labour market remains a constraining factor. Inflation still at 2.5% in 2026, higher than the eurozone, creating risks to competitiveness.

Aggie van HuisselingJan-Paul van de Kerke(+1)
Article tags:
  • Macro economy

China - That 2018 (tariff) feeling – What’s different in 2025?

Just as growth momentum is showing some signs of recovery as we near the end of 2024 , an expected rise in US tariffs under Trump 2.0 will create more drags to GDP growth in 2025. We assume a bigger tariff shock compared to 2018-19, with build-up to an average rate of 45%. But China is now less dependent on the US, has developed a playbook to react, and will add stimulus. We expect annual growth to slow from 4.9% in 2024 to 4.3% (was 4.5%) in 2025 and 4.2% in 2026.

Arjen van Dijkhuizen
Article tags:
  • Macro economy

Germany - Elections and Trump tariffs shape the path ahead

The economy is expected to return to sluggish growth, expanding by 0.7% in 25 and 0.8% in 26. Rising real incomes and falling interest rates mean growth will be driven by domestic demand. Trump tariffs the biggest downside risk: they are likely to hit German exports from H2 2025 onwards. Disinflationary trend to continue, but high wage growth is keeping core inflation elevated. With elections on 23 February, a new government may not be in place before mid-2025. Depending on the election outcome, a step up in fiscal spending is likely given the CDU’s turn.

Jan-Paul van de Kerke
Article tags:
  • Macro economy

US - A bull entered the China shop

The US economy showed remarkable resilience in the face of very restrictive rates. It is however increasingly showing cracks, with weakening consumption and labour market. Uncertainty about future policy is large, as is the range of potential outcomes.

Rogier Quaedvlieg
Article tags:
  • Macro economy

Special - We need to talk about China…

(I) Reliance on China might be the least-worst of all options by Sandra Phlippen. (II) China’s growth impact on Europe – Supply hits even more than demand by Arjen van Dijkhuizen

Sandra PhlippenArjen van Dijkhuizen(+1)

Sustainability

Article tags:
  • Sustainability

ESG Economist - New NGFS scenarios: more damage, less time

In November, the Network for Greening Financial Services (NGFS) published the fifth vintage of its climate scenarios. The new NGFS scenarios have been updated taking into account the most recent developments and the country-level commitments as they stood in March 2024. A new damage function has been applied incorporating the most recent insights into physical risk damages.

Anke Martens
Article tags:
  • Sustainability

ESG Economist - New NGFS scenarios: more damage, less time

In November, the Network for Greening Financial Services (NGFS) published the fifth vintage of its climate scenarios. The new NGFS scenarios have been updated taking into account the most recent developments and the country-level commitments as they stood in March 2024. A new damage function has been applied incorporating the most recent insights into physical risk damages.

Anke Martens
Article tags:
  • Sustainability

ESG Strategist - Higher climate risks do not yet translate into steeper credit curves

In this piece, we look at all issuers included in the Bloomberg euro corporate bond index (excl. financials) and assess whether companies more vulnerable to climate-related risks – physical or transition - also experience steeper credit curves

Larissa de Barros Fritz
Article tags:
  • Sustainability

Carbon Market Strategist - Market bullishness is back

EUA prices have been trending upward following the rally in gas prices which boosted the profitability of coal power generation. Allowances demand for industrial purposes remains low on the back of weak recovery . The bullish sentiment is back to dominate the market for the first time in 16 months driven by the rising uncertainty in European gas markets . The EUA market may still witness a temporary surge in demand around the year end following the yearly break in primary markets. Our outlook for December and January is slightly bullish, where we expect the EUA price to range between 68 and 73 €/tCO2. In 2025, we expect prices to cool down at the beginning of the year before regaining momentum in the second half of 2025.

Moutaz Altaghlibi
Article tags:
  • Sustainability

ESG Strategist - Are credit rating agencies overlooking climate risks?

Climate risks are mounting across the world and Europe is not immune to this global development. The devastating floods in Valencia and the wildfires in Portugal are just recent examples of a phenomena that is expected to become increasingly frequent. As it was noted in our previous research (see [1]), acute physical risks – such as floods, or wildfires – can result in significant direct economic damages, such as the loss of buildings, livestock, natural resources and infrastructure, which in most instances is only partly insured. Moreover, climate-related disasters can also have longer-term impact on economic growth. These can ultimately affect the ability of a country to repay its debt, such that climate-related risks should be – if not already - considered by credit rating agencies. Hence, in this note, we aim to dive deeper into sovereign ratings, in order to understand whether climate-related indicators are accounted for by rating agencies when assessing country risks. We solely focus on climate-related indicators, given that past research has proven that the social and governance pillars (the other components within the E, S and G) remain the biggest drivers of sovereign risk premia (the exception being low-income countries where some environmental variables stand at the forefront - see [2]). This note is structured as follows: below we discuss the data and the methodology used, followed by our interpretation of results. Finally, we finish the note by offering conclusions.

Marta TeixeiraFinn Blokker(+1)
Article tags:
  • Sustainability

ESG Economist - What is the role of green ammonia in decarbonizing the world?

Ammonia is a highly toxic colourless gas with a distinct smell. It is composed of nitrogen and hydrogen. Ammonia can be produced in soil from bacterial processes and from the decomposition of organic matter. Only a very small percentage has been produced this way. Most ammonia is produced from natural gas and air. Natural gas molecules are reduced to carbon and hydrogen. The hydrogen is then purified and reacted with the nitrogen in the air to produce ammonia (Haber-Bosch process). This is called grey ammonia. If this method is combined with carbon capture and storage then this is called blue ammonia. The production of each metric tonne of grey ammonia contributes to the emission of roughly 1.9 metric tonnes of CO2 (1). Global ammonia production accounts for 1.3% of energy related CO2 emissions (2). According to the IEA, ammonia is one of the most emissions-intensive commodities produced by heavy industry, nearly twice as emission intensive as crude steel production and four times that of cement on a direct (scope 1) emissions basis. Another way of making ammonia is by using green hydrogen and nitrogen from the air. This is called green ammonia. Currently, around 70% of ammonia is used to make fertilisers with the remainder used for a wide range of industrial applications such as plastics, explosives and synthetic fibres. But it also has potential as a green energy carrier and as storage medium. In this report, we try to answer the question: What will the role of green ammonia be in decarbonising the world?

Georgette BoeleMoutaz Altaghlibi(+1)
Article tags:
  • Natural resources

Oil market update - Market prospects in 2025

OPEC+ has once again postponed its plan for the revival of its production until January. The outlook for next year is widely seen to be negative with the main international agencies expecting a surplus even if OPEC+ does not step up production as supply additions outpace demand growth. Under the new Trump administration, we expect an increase in oil supply and further slowdown in demand following the proposed reduction in taxes and protective trade measures. We expect significant downside for oil prices over the next year. In the first half of the year, frontloading in demand starts to bring the market into better balance reducing some pressure on prices, though we expect Brent to head towards USD 60 by year end.

Moutaz Altaghlibi
Article tags:
  • Sustainability

PPAs…a key piece in the transition puzzle

Power Purchase Agreements (PPAs) are instrumental in mitigating the market risk for renewables development and pushing the transition forward. PPA contracts can be differentiated in term of the off-taker type and the party baring the output volatility risks.

Moutaz Altaghlibi
Article tags:
  • Sustainability

What to look for at COP29: the cost of delay and the Trump victory

Over the past year, very little progress was made in the ambition and implementation of policies to reduce greenhouse gas emissions globally. At the beginning of next year, countries have to submit their new national commitments to reduce emissions according to the global targets set out in the Paris Agreement (NDCs), with the end-point of the targets extended to 2035, from 2030 . To keep the Paris goals within reach all countries, in particular the G20, have to overperform on their current 2030 climate targets. The new quantifiable goal for climate finance will need to be vastly more ambitious as well as more concrete. The Trump victory in the US could have significant consequences for global climate policy, which could already have an impact on progress at COP29.

Anke MartensGiovanni Gentile(+1)

Our experts

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  • Our expert

"The only certainty in investing is uncertainty about the future"

Sonia Renoult is a Senior Fixed Income Strategist (Rates) at Group Economics of ABN AMRO Bank

Sonia Renoult
Article tags:
  • Our expert

"Debt capital markets play a crucial role in financing the green transition"

Larissa Fritz is a Fixed Income Strategist (Credit), with focus on ESG at the Group Economics of ABN AMRO Bank.

Larissa de Barros Fritz
Article tags:
  • Our expert

"Research challenges you to look at complex issues with a creative eye."

Aggie van Huisseling is an economist Netherlands / data-scientist at Group Economics of ABN AMRO

Aggie van Huisseling

Flagship Publications

Article tags:
  • Sustainability

ESG Economist - 2030 climate target within reach for many Dutch sectors

In this publication, we answer the question of what the path of the Dutch economy and its sectors towards the ultimate 2050 climate-neutral goal might look like. In particular, we look here at the impact that low-carbon technologies can have on reducing greenhouse gases for 21 sectors in our so-called Sector Technology Pathways. What sectors are the heavyweights in the transition, where is reducing greenhouse gases most challenging and what are bottlenecks we need to overcome in the transition?

Casper Burgering
Article tags:
  • Macro economy

Stacking climate risks and financial resilience in the housing market

Climate change creates greater risks that are more frequent and cause more damage to Dutch homes. This study addresses the question of which districts can be deemed ‘climate-vulnerable districts’, i.e. those in which the risks of climate change, but also the costs of energy efficiency measures, may be too much for homeowners or properties to bear.

Bram VendelSandra Phlippen(+1)
Article tags:
  • Macro economy

ESG Economist - Transition check: are renewables in crisis?

The energy transition is an economy wide process where a development in one part affects, directly or indirectly, other parts. Bottlenecks or costs challenges could harm an effective energy transition. The effect of today’s bottlenecks on the transition, such as the limited grid capacity, is magnified because of the mismatch in the timeframe for deploying grid extensions versus what is needed for electrification or renewable deployments.

Larissa de Barros FritzMoutaz Altaghlibi(+1)
Article tags:
  • Macro economy

Ripple effects - Exploring the impact of low Rhine water levels on the Dutch economy

The Rhine, the busiest river in Europe, is of great economic importance. Due to drought, both in 2018 and 2022, there have been episodes where the water level in the Rhine has dropped to critical levels, severely limiting inland shipping. According to the Kiel Institute for the World Economy, in November 2018, low water levels led to a drop in industrial production by 1.5 percent, causing a decline of German GDP by 0.4 percent. 1)

Jeannine van Reeken-van WeeAlbert Jan Swart(+1)
Article tags:
  • Sustainability

ESG Strategist - How exposed are companies and banks to biodiversity risks?

Biodiversity stands for biological diversity. The loss of biodiversity translates into the loss of services provided by ecosystems to the real economy. There are two types of risks associated with biodiversity: physical and transitions risks. Physical risks stem from the loss of biodiversity (for instance, disappearance of animal pollinators, like bees), and transition risks stem from regulations/policies introduced by regulators to mitigate biodiversity loss (such as the introduction of a tax on fertilizers or the implementation of Natura 2000). Physical risks are captured by how much a sector depends on biodiversity (e.g. agriculture depends a lot on animal pollinators, like bees). And transition risks are captured by how much a sector impacts biodiversity (i.e. the more damage a firm causes, the more likely it is to be hit by policies acting against it). The ENCORE database provides qualitative assessments for each sector and sub-sector on their exposure to biodiversity risks and we use these to calculate quantitative biodiversity sector exposure scores. As per existing regulation, banks are required to report their loan book exposure per sector, according to the NACE categorisation. Hence, by combining banks’ loan book exposure per sector and sector scores on biodiversity dependence and impact, we were able to calculate individual banks’ exposure to biodiversity loss risks. Furthermore, we used Natural Language Processing to assess a bank’s awareness of its balance sheet exposure to biodiversity risks.

Marta Teixeira
Article tags:
  • Sustainability

Is flood risk already affecting house prices?

Lessons learned from an impact assessment study in the Netherlands. Global warming increases the probability of flooding. If this risk is not reflected in house prices this raises concerns about a sudden risk re-pricing that may prove financially destabilizing. Our research findings are inconclusive but point towards current flood risks being not (fully) priced in to house valuations. The key methodological challenge in providing a robust estimate of flooding risk on house prices is finding comparable houses for the exercise, while still keeping the sample size sufficiently large.

Jeannine van Reeken-van WeeSandra Phlippen(+1)

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