UBSs latest global growth downgrade comes as the United States and China both signal a shift toward trade rebalancing, a process now shaping the worlds economic landscape.US Treasury Secretary Scott Bessent recently stated that the high tariffs imposed between the US and China must fall before meaningful negotiations can resume.He described the current situation as unsustainable, likening it to an embargo that hurts both economies.
Bessent made clear that neither side considers the current tariff levels145% on Chinese goods entering the US and 125% on US goods entering Chinaviable for the long term.The US administration has introduced a reciprocal tariff policy, aiming to correct persistent trade deficits and support domestic manufacturing.This policy imposes a 10% universal duty on imports, with higher rates for certain partners, and calculates tariffs based on the size of the US trade deficit with each country.Trade Rebalancing Efforts Underpin UBSs Downbeat Global Growth Forecast.
(Photo Internet reproduction)US-China Trade Rebalancing Push Aims for Global StabilityThe administration argues that these measures are necessary to restore industrial capacity, improve national security, and reduce vulnerabilities in key sectors.
For Canada and Mexico, only goods meeting USMCA rules of origin avoid these new tariffs.Bessent emphasized that trade rebalancing is not just about tariffs.
He called for China to shift its economic model toward greater domestic consumption, while the US focuses on rebuilding its manufacturing base.This rebalancing aims to address the structural imbalances that have defined global trade for years: the US running large current-account deficits, and China accumulating surpluses through export-led growth.Experts at the United Nations Conference on Trade and Development (UNCTAD) note that global rebalancing will reshape demand, output, and employment patterns worldwide.They warn that, without coordinated action, these shifts could have deflationary effects and reduce job opportunities, especially in export-dependent economies in East and Southeast Asia.However, a joint approachwhere surplus economies like China boost consumption and deficit economies like the US strengthen productioncould ease the adjustment and limit negative impacts.The US expects to clarify its final tariff stance by the third quarter of this year.
Officials believe that, if both sides act, trade flows can stabilize and set the stage for a more balanced and sustainable global economy.The coming months will reveal whether these rebalancing efforts can deliver the intended results without further disrupting global markets.