On Friday, March 7, during a webinar organized by BT VALO, Fernando Marengo, the firm’s Chief Economist, presented a detailed analysis of global economic prospects.
The global economic and financial landscape is experiencing an unprecedented period of uncertainty. While the future is inherently unpredictable, there are times when volatility and lack of foresight reach peak levels. The current uncertainty is driven by three key factors: global geopolitics, U.S. tariff policies, and the country’s fiscal situation.
1. Geopolitical Factors: A World in Tension
One of the primary drivers of uncertainty is the geopolitical context, marked by large-scale conflicts and tensions among global powers. Russia’s invasion of Ukraine and its uncertain resolution remain critical concerns, while the ongoing conflict between Israel and Hamas adds further complexity to the scenario. Additionally, the growing rivalry between the United States and China—two economic giants with opposing views on global economic and political order—has sparked concerns about the impact of this dispute on markets and international trade.
The shift in global power dynamics and China’s efforts to solidify its position in the global economy raise questions about how international relations will evolve in the coming years and how investment strategies and business decisions will be affected, particularly in emerging markets.
Adding to this uncertainty is the political instability within Europe, where internal tensions within the European Union and external pressures from conflicts along its borders have led to a reassessment of economic and security policies. The evolution of these factors will shape the course of global markets in the years ahead.
2. The Risk of a Trade War
Since Donald Trump took office in 2017, the United States has pursued a trade negotiation strategy centered on tariffs, a policy that has continued to generate economic tensions. The imposition of tariffs on imports from Mexico, Canada, China, and other countries has led to price distortions and disrupted global trade.
When a major economy like the United States imposes tariffs, the domestic price of imported goods rises, creating incentives for local production. However, this phenomenon also leads to reduced consumption of those goods and lower international prices, negatively impacting exporting countries. In smaller economies, retaliatory measures often include countertariffs, which can drive up domestic prices, potentially triggering a large-scale trade war and affecting the trade balance of numerous nations.
In this context, U.S.-China trade relations remain a focal point. The potential for new technological and commercial restrictions could reshape global supply chains and bring significant changes to investment and production dynamics across various industries.
3. The U.S. Fiscal Situation and Its Global Impact
The third major source of uncertainty is the fiscal situation in the United States. On multiple occasions, government officials have mentioned possible adjustment programs, raising doubts about their implementation and consequences. In a highly volatile global environment, fiscal decisions made by the world’s largest economy have a direct impact on financial markets, trade, and the monetary stability of emerging countries.
While such measures may aim to balance public finances, their implementation in an already uncertain global climate could introduce new tensions and hamper economic growth. A severe fiscal adjustment in the U.S. could slow global economic momentum and reduce liquidity in financial markets, particularly affecting Latin America and other emerging regions.
Moreover, U.S. debt levels continue to rise, raising concerns about the long-term sustainability of its fiscal policy. Decisions regarding public debt and interest rates will have far-reaching consequences for financial market stability and global credit access.
A Landscape of Uncertainty
Emerging markets, particularly in Latin America, face a challenging future. The combination of geopolitical conflicts, trade disputes, and U.S. fiscal decisions creates a scenario of high volatility and economic risks. The ability of countries to adapt and their investment strategies will be crucial in navigating this period of uncertainty and seizing potential opportunities amid the crisis.
Fernando Marengo’s analysis underscores the importance of closely monitoring these factors and adjusting economic and financial strategies in response to global developments. In a constantly evolving world, resilience and strategic planning will be essential to mitigate risks and ensure long-term stability.
