Concept of financial data and stock market trading
iStockphoto/DKosig

Amid trade turmoil, the global economy is facing a rising risk of a hard landing, according to a new report from S&P Global Market Intelligence.

The firm’s latest forecast sees real GDP growth of just 2.5% this year, which would be the weakest result since the global financial crisis, excluding the pandemic-driven shock.

In 2026, growth is expected to pick up a bit, powered by added fiscal stimulus in Europe.

However, these outlooks face growing downside risks, S&P said, unless the U.S. approach to trade and economic policy stabilizes.

For now, however, uncertainty driven by U.S. trade policy is rising to “unprecedented heights,” it said.

North America is the centre of the deteriorating forecast.

S&P now expects Canada to fall into a recession in mid-2025, “as trade policy developments hurt investment, household consumption and trade.”

At the same time, U.S. conditions are eroding too.

“Several recent U.S. indicators have pointed to considerably weaker growth in the first quarter of 2025 than we had previously forecast,” it said. “More federal layoffs and higher import tariffs than previously assumed are additional near-term headwinds to growth.”

Additionally, the latest readings from S&P Global’s Purchasing Managers’ Index (PMI) surveys are signalling weaker global growth, the firm reported.

“The global composite output index, a bellwether for global real GDP growth, fell to its weakest level in over a year in February. Moreover, the slide in incoming orders and diminishing backlogs of work signal further weakness ahead,” it said.

At the same time, inflation in core consumer goods is rising, it noted.

“The monthly core goods inflation rate, which we calculate for the G5 group of economies, rose to its highest level for almost a year in January,” S&P said, adding that manufacturing price indexes in the PMI surveys rose in February too.

“Given widespread tariff increases, further upward pressure is likely,” it said.

As a result, the U.S. Federal Reserve Board is now expected to leave its benchmark rates unchanged through most of 2025.

And the U.S. dollar is expected to weaken further this year.

“In line with projected shifts in relative growth and interest rates, we expect the depreciating U.S. dollar trend to continue,” it said. “It could well be a bumpy ride.”

Conversely, the euro is seen strengthening, as expansionary fiscal policy in Germany bolsters the region’s growth prospects.