The modern global order is rapidly transforming under the influence of large-scale shifts in geopolitics, economics, technology and social sphere. Just 2-3 years ago the international financial institutions were actively articulated the concept "fragmentation" but it was perceived with mistrust. Today, it accurately reflects the split of global interests, going beyond the usual dichotomy of "rich North – poor South" or "democratic West – authoritarian East". The new reality is the return of protectionism symbolized by the re-nomination of Donald Trump and his slogan "America First".
One of the first steps was the announcement of a large-scale tariff package on April 2, 2025. Under the pretext of eliminating the trade deficit the United States imposed the 10% tariff on all imports and for some countries the tariffs were significantly higher: 20% for the EU, 27% for India and Kazakhstan, 24% for Japan, 46% for Vietnam. China faced a total tariff of 65% (including an additional 34% fee), and for some categories of goods the tariffs reached 245%. The U.S. turn towards isolationism looks especially paradoxical against the backdrop of its historical role as the main defender of free trade and market. It was the American intellectual tradition that laid the foundations for the modern idea of open markets as the engine of global growth and prosperity. And today's policy, in which the U.S. trade confrontation is combined with a sharply tough fiscal agenda, is perceived even more severely.
The escalation of the trade conflict is already having a negative impact on the American economy itself. Although the U.S. economy has continued to grow steadily for eleven consecutive quarters, and GDP in Q4 2024 even increased by 2.4% (in annual terms), signs of a slowdown are increasing in 2025. The main growth drivers previously were household consumption and government spending. However, the sustainability of their growth is being questioned due to the rhetoric about a possible budget cutting. An additional risk factor is the reduction in investment. Inflation remains stable: deflation was even recorded in March. But it is noteworthy that the Fed. kept the base rate unchanged in March, which suggests that the Fed. is considering the potential risks of an inflation reversal against the backdrop of Trump's policies. By the way, the IMF in its April WEO sharply reduced its forecast for U.S. economic growth in 2025 from 2.7% to 1.8%, taking into account the possible negative consequences of the new tariff policy for the American economy itself.
According to the WTO, in 2025, global trade will decrease by 0.2% compared to 2024, which is 3 p. p. lower than it would have been without the U.S. tariff increase. The IMF also revised its global economic growth forecast for 2025 downwards in its last WEO from 3.3% to 2.8% (YoY).
It is noteworthy that a number of countries have announced their refusal to apply mirror duties to the U.S. However, China, on the contrary, is taking a tough stance rejecting agreements that could infringe on its interests and announcing possible retaliatory measures including restrictions for countries that support the U.S.
One of the vulnerable industries against this background could be the global automobile market. Nevertheless, China's economy in Q1 2025 demonstrates sustainability showing GDP growth of 5.4%, which was higher than expected. The data already covers the beginning of the trade conflict, signaling the strength of domestic demand. However, risks remain related to the ongoing real estate crisis, deflation and the liquidity trap (high savings rates amid tight credit).
In response to Trump's attacks on the Fed. chief, the U.S. dollar index fell to its lowest levels since March 2022. Financial markets also reacted nervously. The U.S. stock market showed its worst performance since Q3 2022, primarily due to a drop in tech stocks: Nvidia, Alphabet, Apple and Microsoft fell by double digits. Chinese indices fell in sync, while European stock markets showed less pronounced negative dynamics. Commodity markets in Q1 2025 showed a trend of falling prices for almost all commodity groups, except for precious metals and agricultural products. The FAO index grew during Q1 2025 and was even higher than the average for the same period of the previous year. Oil prices continued their decline that began in the second half of 2024, due to a breakdown in discipline within OPEC+, growing global risks, and risks of weakening demand.
For Kazakhstan the main channel for transmitting external shocks remains the global oil market. In the Q1 2025 revenues of the National Fund fell by almost 40% due to lower oil prices which led to a deterioration in the current account. At the same time the output gap is positive, reflecting economic overheating. The STEI for Q1 increased by 8.3% compared to Q1 2024. However, further deterioration of the external environment may change this trajectory. Concurrently economic overheating along with external factors led to an increase in inflation: in March inflation accelerated in annual terms to 10%, especially due to the rise in the services.
In this regard AERC has slightly adjusted its macroeconomic forecasts. According to the AD model Kazakhstan's real GDP growth is expected to be 4.5% in 2025 (versus 4.6% in the January forecast), with gross fixed capital formation, moderate household consumption and growth in government spending remaining the drivers. According to the AS model the real GDP forecast is 4.4% (versus 4.5% previously), mainly due to growth in the transport and construction sectors.
The inflation background in the country remains tense. The forecast for average annual growth in consumer prices has been increased to 9.8%. The likelihood of a downward revision is low, due to the expansion of the fiscal stimulus. External economic risks, primarily the deterioration of the terms of trade, continue to put pressure on inflows to the National Fund and the fiscal balance. The forecast for the state budget deficit has been worsened to (-)2.4% of GDP (versus (-)2.3% previously). In turn, due to the expected growth in oil production a slight improvement in the current account balance of payments is predicted – to (-)7.1% of GDP (versus (-)8% in the January forecast).
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