[2025 Financial Forum] Nomura Chief Economist: "Trump Tariffs Greatly Increase Global Recession Risk"

Takahide Kiuchi, Chief Economist at Nomura Research Institute,
Keynote Speech at the Asian Financial Forum:
"Trump's Tariff Shock Will Worsen the Global Economy"
Tariff War May End Before Next November

Takahide Kiuchi, Chief Economist at Nomura Research Institute, attended the '2025 Asian Financial Forum' held at the Western Chosun Hotel in Jung-gu, Seoul on the 21st, delivering a keynote speech on the topic of 'Trump Tariffs and the Global and Japanese Economy.' 2025.5.21 Photo by Cho Yongjun

There has been a claim that if the tariff policies of the Donald Trump administration continue, the probability of an economic recession will rise significantly not only in the United States and Japan, but also in other major countries around the world. It is also projected that the South Korean economy will not be able to avoid negative impacts. Some have predicted that, in order to avoid a recession and a decline in approval ratings, the Trump administration may significantly lower tariff rates before the fall of next year.

Takahide Kiuchi, Chief Economist at Nomura Research Institute, warned in his keynote speech at the '2025 Asian Financial Forum' held at the Westin Chosun Seoul in Jung-gu, Seoul on the 21st, "President Trump is using tariffs as a negotiation tool to reduce the U.S. trade deficit," and added, "The imposition of tariffs by the United States is disrupting supply chains and reducing demand from households and businesses, which could push not only the United States but also Japan, South Korea, and the global economy into recession."

Kiuchi is a leading macroeconomic expert in Japan who previously served as a Policy Board Member at the Bank of Japan (BOJ), the country's central bank. He predicted that under the current U.S. tariff policy, the U.S. gross domestic product (GDP) would decrease by 0.92% compared to before the tariffs, while Japan's GDP would drop by 0.46%. He also projected that global GDP would shrink by 0.35%. Initially, the United States planned to impose an average tariff rate of 145% on imported goods from China, but temporarily reduced it to 30% through negotiations. However, the basic tariff of 10% on major countries will be maintained.

He forecast that the GDP decline caused by the tariff shock would greatly increase the probability of a global recession. Kiuchi warned, "If the U.S. tariff policy continues, the probability of a recession in the United States will rise to 40%, and the probability of a recession in Japan will reach 50%," adding, "If a recession shocks the financial markets, it could lead not only to a global recession but also to a financial crisis."

He also raised the possibility that, in order to reduce the trade deficit, the United States might exert pressure on other countries not only through tariffs but also in the foreign exchange market. He said, "The United States could adopt a new exchange rate adjustment policy by demanding that other countries purchase U.S. Treasury securities to induce a weaker dollar," and evaluated, "This is similar to the Plaza Accord of 1985, but this time, the policy would be even more America-first than it was then."

However, he diagnosed that President Trump would find it difficult to maintain the current high-tariff policy for an extended period for several reasons. Fundamentally, economic instability is growing within the United States, and President Trump's approval ratings are also declining. He particularly emphasized, "Since the U.S. midterm elections are scheduled for November next year, President Trump may want to end the tariff war before then to avoid backlash against the Republican Party."

Kiuchi identified Japan as the country that would be most affected by Trump’s tariff policy. He analyzed that the current item-specific tariffs of 25% and reciprocal tariffs of 10% imposed by the United States on Japanese automobiles, steel, and aluminum would reduce Japan’s GDP by a total of 0.46%. If a 24% reciprocal tariff is reimposed after a 90-day tariff suspension period, this, combined with the item-specific tariffs, would decrease Japan’s GDP by 0.81%. He argued, "It would be wise for Japan to persistently continue negotiations until next year, avoiding major concessions in tariff negotiations with the United States." He also noted that this could serve as a reference for South Korea's tariff negotiation policies with the United States.

He asserted that, for Japan to overcome the crisis of the tariff war and return its economy to growth, a large-scale productivity reform is necessary. He explained, "The Bank of Japan’s excessively accommodative monetary policy has caused the yen to depreciate and prices to rise, leading to a contraction in consumption," and added, "Japan's long-term economic stagnation can be overcome not through drastic monetary easing, but through structural reforms."

He continued, "Japan must improve labor productivity through labor market reforms and advance its industrial structure," and added, "In particular, resolving the infrastructure imbalance caused by excessive population concentration in Tokyo is also essential for enhancing the efficiency of the Japanese economy."