Since the Paris Agreement (2015), the green bond market has been on the rise. Although still modest on a global scale (USD 2,900 billion, which is barely 2.5% of total bond outstandings), its size has more than quintupled over the last five years. The eurozone has been the driving force behind this take-off, followed at a distance by the United States and China.
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Since January 2025, the United States has announced major reversals in its foreign and trade policies. For developing countries that depend on international aid, the suspension of USAID and the increase in tariffs on US imports create a double shock that will durably weaken their economic prospects.
Our nowcasts for Q2 point to moderate growth in the Eurozone (+0.2% q/q) and France (+0.1% q/q). The Atlanta Fed's GDPNow suggests a rebound in US growth (+0.3% q/q) after the slight contraction in Q1.
Inflation slowed on both sides of the Atlantic in March, mainly due to the fall in energy prices. This was helped by the fall in gas and oil prices in the first quarter of 2025. In the United States, however, the situation remains worrying, with household inflation expectations at their highest level for over 30 years (University of Michigan survey); they are also rising in the United Kingdom against a backdrop of still robust wage growth. The situation is much more comfortable in the Eurozone, where inflation expectations remain moderate and wages are decelerating, reinforcing the 2% target. In Japan, the situation remains under control.
For several years now, Italy has had to generate primary budget surpluses in order to stabilize its public debt. The current level of fiscal deficits and the foreseeable increase in interest payments are likely to put the United States, the United Kingdom, and France in a similar situation in the coming years. These countries will ultimately have to balance their primary budgets if they want to stabilize their public debt.
The announcements on April 2, featuring a massive and widespread (albeit differentiated by country) increase in US tariffs, constitute a historic shock. The final extent of the damage and the aftershocks remain to be seen, but there is no doubt that the economic consequences will be negative, starting with the United States. They are already evident in the turbulence on US financial markets. Even if there is a de-escalation in the trade war, which is our base case scenario, uncertainty remains extremely high, and activity will be penalized for a long time.
One direct and immediate consequence of Donald Trump's announcements on 2 April on tariffs, which are reciprocal and reduced in name only, was to accentuate the downside risks to the US economy and to seriously shake up the financial markets. According to our forecasts, the US economy will slow sharply but avoid recession, on the optimistic assumption of a de-escalation in the trade war and an easing of uncertainty.
