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US tariffs will affect global economic growth, which is forecast to slow to 2.3% in 2025, down from 2.8% in 2024.
This is according to Swiss Re, which has released a new white paper about the economic effects of the tariffs. This, it said, would hit premiums; however, investment incomes could largely remain unaffected and provide a safety net.
The paper forms part of the reinsurer’s latest Sigma report. The effects this could have on insurance investors’ portfolios could also be major with many having to shore up smaller premiums with increased investment yield.
“Amid unstable policy environment and competitive pressures, both life and non-life insurers see decelerating premium growth,” it said. “Tariffs impact to hit US motor physical damage hardest, but pockets of underwriting opportunity may emerge.”
The report said that global growth is decelerating as the US tariff policy reduces trade and heightens uncertainty.
“Consumers and firms have likely already begun cutting spending and investments in response to the uncertainty, which may not be fully visible in the economic data yet,” it said.
"Tariffs to slow global GDP growth and weigh on insurance demand."
According to the Swiss Re Institute's World Insurance sigma report, global GDP growth (inflation-adjusted) was expected to slow to 2.3% in 2025 and 2.4% in 2026 from 2.8% in 2024. The global insurance industry is expected to follow the trend, with total premiums expected to slow to 2% this year from 5.2% in 2024, picking up marginally to 2.3% in 2026.
"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,” said Jérôme Haegeli, Swiss Re's Group Chief Economist. “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."
This take has been backed up by other market players that have also given warnings about the US economy.
This week, Aviva Investors said that the US’s global dominance was being challenged by rising protectionism, fiscal imbalances, weakening demand for the dollar and Treasuries, which the tariff uncertainty was a symptom of.
“Global growth is expected to slow to 2.75-3%, while inflation is expected to remain above target in the near term, but fall back in 2026,” it said. “Central banks are generally expected to keep easing, with the Fed and BoE expected to cut rates gradually through 2025 and into 2026.
Aviva Investors said it remained “cautiously optimistic for the remainder of the year”, with a modest equity overweight, neutral view on government bonds, a preference for European credit and a material underweight in the US dollar.
"Analysts will be watching to see if the administration
now changes its negotiation stance."
It added that, like Swiss Re, it believed that tariffs would continue to be a key factor, with new levies expected to be imposed on pharmaceuticals, semiconductor and related imports.
“That said, while the effective tariff rate could rise (or fall) over the coming weeks and months as trade deals are hammered out, we do not expect it to change materially,” said Aviva Investors. “As such, uncertainty about the final destination on tariffs may be clearer, but the impact on the US and global economy of a roughly six-fold increase in US tariffs, to levels last seen in the 1930s, remains unclear.”
This week, the US announced new tariffs in Japan of 25% and extended the deadline for negotiations to August 1. The market seems to imply that the 25% tariffs on automotive companies will remain largely in place despite the government efforts so far. Overall tariff rates of around 10% are also being factored in.
“Analysts will be watching to see if the administration now changes its negotiation stance so that an agreement could be reached sooner,” said Oleg Kapinos, Head of Global Distribution Strategy at Asset Management One, in a comment on the Japanese tariffs.
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 said it had lowered growth expectations for most major economies in 2025.
Warnings on this have come all year. In March, Karen Ward, Managing Director and EMEA Chief Market Strategist at J.P. Morgan Asset Management, said at a conference that US dominance over markets posed a risk and investors should be cautious.
This week, the New York Fed’s Survey of Consumer Expectations showed that respondents in June saw inflation at 3% 12 months from now, which was the same level as it was in January.
After several years of the fastest growth in the US – when compared to Canada, UK, Germany, Italy, France, Japan, Australia – in the post-pandemic period, US GDP growth is forecasted at 1.5% this year, which is a dramatic slowing from 2.8% in 2024.
"Growth in the global insurance industry is slowing
in both life and non-life sectors."
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. "US consumers will be hit hardest by the US' tariff policy and cut their spending as a consequence of higher prices,” said Haegeli. “This, in turn, will weigh on US growth, which mostly depends on household consumption."
Swiss Re Institute forecasted a rebound from the 2025 tariff “shock” to “come later in 2026”.
This would come with “somewhat” firmer growth of 1.8% as the US economy adjusts to a "new normal" of higher tariff rates, supported by a stabilisation in labour market conditions.
Currently, those labour market conditions are being rattled by economic uncertainty, and migrant deportations (which hit the construction and agricultural industries).
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.
“Premium growth slows, while profitability outlook remains positive,” it added.
“After a strong 2024, growth in the global insurance industry is slowing in both life and non-life sectors.”
Swiss Re Institute forecasted 2% year-on-year total premium growth in 2025 and 2.3% in 2026, about half the growth rate of 2024.
In non-life insurance, intensifying competition in personal lines and softening market conditions across commercial lines are driving significantly lower premium growth, down to 2.6% this year from 4.7% in 2024.
Premium growth in life insurance in 2024 was 6.1%, which will slow to 1% this year as interest rates moderate, with growth to improve again to 2.4% in 2026.
At the same time, Swiss Re added, insurers' profitability outlook remained positive due to continuing gains in investment income.
