US tariffs levied by Donald Trump create a burden of around $780 billion on the global economy, or 2.5% of global GDP, according to new estimates by UBS, with the primary impact falling on China.
Inflation is expected to increase sharply in the US but not really anywhere else, UBS said, as virtually no country has retaliated and the currency depreciation against the US dollar has either been limited or absent.
Despite earlier exemptions for tech products, China still accounts for 63% of total tariff value and now faces a 97% weighted average tariff rate.
"With the current level of tariffs on China, trade could largely cease," UBS said.
For the third time in two weeks, the bank has revised its global growth forecast, now to 2.5% for 2025 from its 2.9% previous latest calculation, and by a further 0.2 percentage points in 2026 to remain at 2.5%.
It estimates a loss of around $2.75 trillion for the impact this year and next.
For the US, 2025 GDP growth has been revised from 2% to 1.5%, and 2026 from 1.8% to 0.8%. UBS projects domestic demand to contract by three percentage points cumulatively over the two years, turning negative by year-end. It also expects US core PCE inflation to peak at 4.6% in the second quarter of 2026.
China and Canada have announced retaliatory tariffs, while the EU has paused its measures pending negotiation.
"It is clearly possible that we end up with lower tariffs through negotiation, in which case we will change our forecasts again, but there is also some risk of higher tariffs as pharma and semiconductor tariffs have not yet been announced."