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Can a Global Tariff Truce Stabilize Post-Pandemic Inflation? Since the pandemic, the world economy has been balancing on the tightrope of convalescence — staggering with high inflation, supply chain meltdown, and geopolitics. One idea that is slowly gaining traction among policymakers and economistRead more
Can a Global Tariff Truce Stabilize Post-Pandemic Inflation?
Since the pandemic, the world economy has been balancing on the tightrope of convalescence — staggering with high inflation, supply chain meltdown, and geopolitics. One idea that is slowly gaining traction among policymakers and economists is that of a “global tariff truce.” The hypothesis is beautiful and powerful: If countries were to desist from raising or even roll back trade tariffs, might that be to curb inflation and bring order to global prices?
Let’s break down this concept in humanized, real-world terms.
The Inflation Aftershock
When COVID-19 struck, factories closed, shipping was halted, and industries were shut down altogether. When economies reopened, demand bounced back — but supply couldn’t match it. Prices for basics such as fuel, food, and metals skyrocketed.
And then, just as things were settling into a new normal, trade barriers and tariffs fueled the inflationary flames.
For example, tariffs on imported steel, semiconductors, or fertilizers increased the price of producing everything from cars to crops. Those costs didn’t stay theoretical — they seeped into citizens.
In short, tariffs were sneaky inflation multipliers, higher prices on regular stuff that virtually no one even noticed.
What a “Global Tariff Truce” Means
Tariff truce is not replacing tariffs overnight. Instead, it’s a collective agreement among the world’s biggest economies — say, the U.S., China, EU, and India — to put new tariffs on ice and gradually eliminate existing tariffs on priority items that affect inflation, including:
- Foodstuffs and farm produce
- Energy sources
- Industrial inputs (e.g., steel, aluminum, microchips)
- Pharmaceuticals and medical devices
The idea takes inspiration from the post-war period of trade harmony when international cooperation gave a push to rebuild economies. Removing trade barriers, the truce will increase supply, lower prices, and ease pressure on prices worldwide.
Why It Might Stabilize Inflation
Cheaper Imports → Lower Prices
Tariffs are a sneaky tax. Reducing or eliminating them lowers import costs for businesses immediately, which they can then pass on to consumers. For instance, a 10% reduction in tariffs on imported food or gasoline immediately lowers grocery and transportation costs.
Boosted Supply Chain Flow
A truce would clear the cross-border commerce in goods of fewer bureaucratic or tariff-related hurdles. This would take pressure off production bottlenecks and shortages — prime drivers of post-pandemic inflation.
Business Confidence Boost
Companies prefer predictability. A tariff truce sends the message that the principles of global commerce are returning to business as usual, and companies can invest, restock, and hire again — without fear of surprise cost surprises.
Restoring Global Cooperation
Trade tensions, especially between major economies, have kept markets on edge. A show of peace would calm financial nervousness and peg emerging markets’ currencies, indirectly tempering inflationary pressure in the process.
The Skepticism and Challenges
Of course, a tariff truce isn’t a magic wand. Others contend that there are numerous drivers of inflation — energy shocks, climate shocks, and increasing wages to list a few. Reducing tariffs might only shave a few percentage points — not cure the issue.
And politics. Governments still largely view tariffs as ways of protecting home jobs and industries. Rescinding foreign steel tariffs that save manufacturers money but anger local manufacturers would be an example. With populist politics, politicians will find it easier to blame “foreign competition” than making appeals for international cooperation.
Moreover, geopolitical tensions — i.e., U.S.-China rivalry or Russia sanctions — are a brake on blanket trade truces. Confidence among great powers is at a record low, and trade policy has emerged as a strategic competition tool.
The Big Picture: Economic Cooperation vs. Fragmentation
Despite these issues, most economists have confidence that sector-specific or partial tariff truce would be possible. For example, countries can start with reducing tariffs on:
- Agricultural goods (to stem food inflation)
- Renewable energy equipment (to minimize transition costs)
- Semiconductors and materials (to ease manufacturing inflation)
Such coordinated assistance would restore confidence and pave the way for greater trade normalization — a step toward re-globalization, not the economic fragmentation of recent years.
Why It’s About More Than Just Prices
A tariff truce is not just a means of slowing inflation — it’s a means of imposing a sense of global collective responsibility. The pandemic demonstrated how linked our economies are. A ban on exports from one nation or a tariff increase can cascade across the globe, harming farmers in Kenya, factory workers in Vietnam, and New York shoppers.
Reducing these barriers can allow the world to heal not only economically, but psychologically — by restoring trust that cooperation, not separation, fuels progress.
Conclusion: A Truce Worth Trying
- A global tariff truce won’t snap inflation into remission overnight, but it could take the edge off and send a powerful message: that countries can still unite for the good of all in a more divided world.
- By opening doors, lifting supply, and calming price whipsaws, such a move could stabilize economies and expectations — the two most important ingredients to long-term recovery.
- In the end, the issue is less whether or not a tariff truce can reduce inflation, but whether or not nations have the political will to place cooperation ahead of competition.
For for although tariffs build walls, a ceasefire builds bridges — and bridges are what the post-pandemic world most requires.
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1. What do “recession” and “soft landing” actually mean? Before we talk predictions, it helps to clear up the jargon: Global recession (in practice) means: World growth drops to something like ~1–2% or less. Several major regions (US, Euro area, big emerging markets) are in outright contraction forRead more
1. What do “recession” and “soft landing” actually mean?
Before we talk predictions, it helps to clear up the jargon:
Global recession (in practice) means:
Soft landing means:
Central banks managed to tame inflation by raising rates…
The current debate is really:
2. What are the official forecasts saying right now?
If you look at the big global institutions, their base case is “slow, fragile growth” rather than “clear recession”:
The IMF’s October 2025 World Economic Outlook projects global growth of about 3.2% in 2025 and 3.1% in 2026 weaker than pre-COVID norms, but still growth, not contraction.
The World Bank is more pessimistic: their 2025 projections show global growth slowing to roughly the weakest pace since 2008 outside of official recessions, around the low-2% range.
The UN’s 2025 outlook also expects global growth to slow to about 2.4% in 2025, down from 2.9% in 2024.
The OECD (rich-country club) says global growth is “resilient but slowing”, supported by AI investment and still-decent labour markets, but with rising risks from tariffs and potential corrections in overvalued markets.
Think of it like this:
Nobody is forecasting a great boom.
Most are not forecasting an official global recession either.
The world is muddling through at an “OK but below-par” pace.
3. But what about risk? Could 2025 still tip into recession?
Yes. Quite a few serious people think the probability is non-trivial:
J.P. Morgan, for example, recently estimated about a 40% probability that the global or US economy will be in recession by the end of 2025.
A McKinsey survey (Sept 2025) found that over half of executives picked one of two recession scenarios as the most likely path for the world economy in 2025 26.
So the base case is “soft landing or slow growth”, but there is a real coin-flip-ish risk that something pushes us over into recession.
4. Why a soft landing still looks slightly more likely
Here are the forces supporting the “no global crash” scenario:
a) Growth is weak, but not dead
The IMF, World Bank, OECD, and others all have positive growth numbers for 2025 26.
Some major economies for example, the US and India are still expected to grow faster than the global average, helped by AI investment, infrastructure, and relatively strong labour markets.
This is not a booming world, but it is also not a shutdown world.
b) Inflation is cooling, giving central banks more room
After the post-COVID spike, inflation in most large economies has been falling towards central bank targets. The OECD expects G20 inflation to gradually move towards ~2 3% by 2027.
That allows central banks (like the Fed, ECB, RBI, etc.) to stop hiking and, in some cases, start cutting rates gradually, which reduces pressure on businesses and borrowers.
In practical terms: mortgages, corporate borrowing, and EM currencies are now under less stress than at peak-rate times.
c) Labour markets are bending, not collapsing
Unemployment has ticked up in some economies, but most big players still have reasonably strong labour markets, especially compared to pre-2008 crises.
When people keep jobs, they keep spending something, which supports earnings and tax revenue.
d) Policy makers are terrified of a hard landing
Governments and central banks remember 2008 and 2020. They know what a synchronized global crash looks like. That means:
Faster use of fiscal support (targeted transfers, investment incentives, etc.).
Central banks ready to react if markets seize up (swap lines, liquidity measures, etc.).
Is it perfect? No. But the “lesson learned” effect reduces the odds of a completely uncontrolled collapse.
5. What could still push us into a global recession?
Now the uncomfortable part: the list of things that could go wrong is long.
a) High interest rates + high debt = slow-burn risk
Even as inflation falls, real rates (inflation-adjusted) are higher than in the 2010s.
Governments, companies, and households rolled up a lot of debt over the past decade.
The IMF has flagged the rising cost of debt servicing and large refinancing needs as a major vulnerability.
A big refinancing wave at still-elevated rates could quietly choke weaker firms, banks, or even countries leading to defaults, financial stress, and eventually recession.
b) Asset bubbles, especially in AI stocks and gold
The Bank for International Settlements (BIS) recently warned about a rare “double bubble”: both global stocks and gold are showing explosive price behaviour, driven partly by AI hype and central-bank gold buying.
If equity markets (especially AI-heavy indices) correct sharply, it could hit:
The Economist has even outlined how a market-driven downturn might look: not necessarily as deep as 2008, but still enough to push the world into a mild recession.
c) Trade wars, tariffs, and geopolitics
The OECD’s latest outlook explicitly notes that new tariffs and trade tensions, especially involving the US and China, are a meaningful downside risk for global growth.
Add on top:
Any major escalation could hit trade, energy costs, and confidence very quickly.
d) China’s structural slowdown
China is still targeting around 5% growth, but:
It faces a deep property slump, weak domestic demand, and shifting export patterns.
If Beijing mis-handles the delicate balance between stimulus and reform, China’s slowdown could be sharper dragging down commodity exporters, Asian neighbours, and global trade.
e) “Running hot” for too long
Some rich countries are still running relatively loose fiscal policy, even with high debt and not-yet-normal inflation. Reuters described it as the world economy being “run hot” good for growth now, but potentially risky for future inflation, bond markets, and currency stability.
If bond markets suddenly demand higher yields, you can get a shock similar to the UK’s mini-budget crisis in 2022 but scaled up.
6. So what does this mean in real life, for normal people?
If the base case (soft landing / weak growth) plays out, 2025 26 will probably feel like:
Slow but not catastrophic:
Growth is there, but it feels “meh”.
Salary hikes and hiring are slower, but most people keep their jobs.
AI/tech, defence, some infrastructure and energy plays could remain strong.
Rate-sensitive sectors (real estate, some consumer discretionary) stay under pressure.
High volatility:
Markets jump on every inflation print, Fed/ECB statement, or geopolitical headline.
Short-term traders may love it; long-term investors feel constantly nervous.
If the risk case (recession) hits, it will likely show up as:
A sharp equity correction (especially in AI-rich indices).
A rush into “safe” assets (bonds, gold, defensive sectors).
Rising defaults in riskier debt and weaker economies.
Rising unemployment and profit cuts.
7. How should an investor think about this (without pretending to predict the future)?
I cannot and should not tell you what to buy or sell that has to be tailored to your situation. But conceptually, given this backdrop:
Do not bet your entire portfolio on one macro view.
Assume both:
are reasonably plausible, and stress-test your allocations against both.
Watch your leverage.
Quality matters more when the tide goes out.
tend to survive both soft landings and recessions better than speculative names that only work in a perfect world.
Diversify across regions and asset classes.
Time horizon is your friend.
If your horizon is 7–10+ years, the exact label “recession” vs “soft landing” in 2025 matters less than:
Bottom line
If you force me to put it in one sentence:
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