Global growth is decelerating as US tariff policy reduces trade and heightens uncertainty, says Swiss Re Institute.

The analysis concedes the effect may not be fully visible in the economic data yet, but consumers and firms have likely already begun cutting spending and investments in response to the uncertainty.

According to Swiss Re Institute's World Insurance sigma, global inflation-adjusted gross domestic product growth is expected to slow from 2.8 per cent last year, to 2.3 per cent this year and 2.4 per cent in 2026.

The global insurance industry is expected to follow the trend with total premiums growth expected to slow to 2 per cent this year from 5.2 per cent in 2024, picking up marginally to 2.3 per cent in 2026.

The report states: “The risks and costs of the accelerating fragmentation of economies and markets may be serious for insurance.

“Trade barriers and supply chain disruption or reshoring may push up inflation for prolonged periods, feeding into higher claims costs.

“Restrictions on cross-border capital flows for [insurers and] reinsurers can lead to inefficient capital allocation and higher capital costs, ultimately leading to higher insurance prices and possibly curtailing the insurability of peak risks.”

Jérôme Haegeli, Swiss Re’s group chief economist, said: “While insurers’ profitability outlook is still benefiting from rising investment income, we expect tariffs to slow global GDP growth, and consequently weigh on insurance demand. In the long term, US tariff policy is another move towards more market fragmentation, which would reduce the affordability and availability of insurance, and so diminish global risk resilience.”

The report said: “The volatile nature of US policy changes under the current administration has ushered in a paradigm shift of diminished confidence in the US Government, eroding its status as a ‘safe haven’ for global capital. Consequently, Swiss Re Institute has lowered growth expectations for most major economies in 2025.

“After several years of the fastest growth in the US [compared to Canada, UK, Germany, Italy, France, Japan and Australia] post-pandemic, US GDP growth is forecast at 1.5 per cent this year [slowing from 2.8 per cent in 2024].

“As global supply chains become less efficient and domestic US industries more protected from international competition, US inflation will likely move structurally higher on average.

Mr Haegeli said: “US consumers will be hit hardest by US tariff policy and cut their spending as a consequence of higher prices. This in turn will weigh on US growth which mostly depends on household consumption.”

Later in 2026, Swiss Re Institute forecasts a rebound from the 2025 tariff shock, with somewhat firmer growth of 1.8 per cent as the US economy adjusts to a “new normal” of higher tariff rates, supported by a stabilisation in labour market conditions. Over the medium to long term, however, the reduced flow of goods, services, capital and people is expected to pose a structural headwind to potential growth.

Analysts added: “In Europe, policy uncertainty alone will weigh on economic activity, and result in unchanged growth at 0.8 per cent this year.

“US-EU trade negotiations are the main risk to the baseline outlook. However, weaker 2025 growth could give way to a brighter picture in 2026.

A more expansionary fiscal stance by the new German government, as well as supportive credit conditions due to further interest rate cuts from the European Central Bank, should push eurozone growth to 1.3 per cent next year.

Meanwhile, China's GDP growth is expected to slow to 4.7 per cent compared to 5 per cent in 2024 as tariffs and persistent uncertainty disrupt economic activity.