Global Economy took tariff hike in its stride, but stronger headwinds are ahead

The Global Economy appears to have taken a sharp rise in U.S. tariffs and increased uncertainty about the future of the international trading system in its stride, but faces stronger headwinds as tax rates continue to climb.

As more countries release figures for economic growth that cover the second quarter of this year, a clear pattern has emerged. Those that grew rapidly in the first quarter as U.S. businesses raced to build up inventories ahead of higher tariffs slowed in the second quarter as those duties were imposed.

The most salient example of that swing was Ireland, which saw its gross domestic product increase by 7.4% in the three months through March, before seeing it drop by 1% in the three months through June.

A less operatic version was set out in data released Thursday by the U.K.’s statistics agency, which recorded a slowdown to 0.3% from 0.7% between the first and second quarters. Switzerland on Friday reported that growth slowed to 0.1% from 0.8%.

As first halves go, the figures were quite good for both the U.K. and Switzerland. And although a number of big economies have yet to release figures for the second quarter, it seems clear that global economic growth has held up better than expected when the threat of high tariffs loomed. Japan was among the latest to publish data Friday, recording a pickup in growth during the second quarter after a slightly stronger start to the year than previously estimated.

There are parts of the global economy that, so far, seem to have been little affected by either the anticipation or the fact of higher tariffs, although they may yet be. Spain recorded growth of 0.6% in the first quarter, and followed it up with 0.7% in the second. Poland’s slightly smaller economy had a similar experience.

For those keeping score, the choice many countries have made in forgoing retaliation may count as a series of losses for them and a sequence of wins for the U.S. But those choices are also wins for the global economy, and for now a return to the tit-for-tat mayhem of the 1930s seems unlikely.

That isn’t to say that the global economy hasn’t been harmed by President Trump’s fondness for taxes on imports. Far from it. But it will take some time before the impact of tariff increases that are already settled is clear, and it is likely that further increases in duties will add to the damage.