HSBC global economist James Pomeroy recently visited the Isle of Man for the first time to provide an update to the bank’s customers on current market conditions and highlight some of the prevailing economic trends.

Below, he outlines some of the key issues raised at that event which was held at the Comis Hotel and Golf Resort earlier this month.

Q: How does the change in US administration affect the global economic outlook?

JP: The world now faces a lot more uncertainty, with tariff threats and implementation keeping everyone on their toes.

This should weigh on global investment by firms, but the full impact on trade flows and inflationary pressures will only become clear in the coming months.

Higher tariffs on Canada and Mexico would be particularly painful for those economies, given the share of trade that is with the US, but risks are clear in Europe, too. With European consumer spending remaining subdued, weak exports to the US would pose another challenge.

Q: What other key risks are out there in 2025?

JP: It’s not only the US where we face policy uncertainty – in China we may or may not get more stimulus to support the domestic economy.

Global trade flows remain uncertain because of tariffs and not knowing how quickly, or how, supply chains will adapt.

There are also a lot of uncertainties about inflation – with energy prices rising in the past few months and some areas of food inflation (like coffee and cocoa) becoming challenging.

As a result, central banks could opt to respond to weaker growth projections with more rate cuts or to higher inflation risks with fewer cuts. Uncertainty is coming from all angles.

Q: How does the economic outlook look closer to home?

JP: In Europe we are seeing two trends play out at once – manufacturing weakness and a cautious consumer. Grappling with high energy prices, less productive firms and higher wage costs, we’re seeing more European manufacturers lose market share to firms in Asia.

However, consumption has been remarkably soft across the UK and Eurozone despite a much more favourable real wage story as the cost-of-living crisis slowly abates for more households.

Households’ caution has kept savings rates high and if we do see confidence improve then growth could pick up materially.

Inflation risks are there, notably from food and energy prices, but we continue to see a slow grind lower in inflation and central banks to keep cutting rates.

We expect the Bank of England to take Bank Rate to 3% by early 2026, for example.