Keynote address by Alexandre TombiniChief Representative, Bank for International Settlements, Representative Office for the Americas Central Banking Autumn MeetingsRio de Janeiro, 19 November 2025 Introduction I would like to start by thanking the organisers for their kind invitation. The year 2025 has seen an unusual surge in policy uncertainty, amid a vortex of policyactions and counteractions, which at some point became difficult to even track properly. Sombreforecasts proliferated, often released close to the announcement of policy decisions. Many of Indeed, this year has turned into an extraordinary learning opportunity. Lessons havecome in many areas. Let me focus on a few of them. The global business cycle At the start of the year, we were confronted with a powerful narrative: a healthy global expansionhad been buffeted by policy shocks related to sharply rising US tariffs and widespread expansion The upshot for growth and inflation seemed clear, and not favourable. Expectations forglobal growth were revised downwards (Graph 1.A), particularly for emerging market economies(EMEs). The downshift would probably be driven by a fall in investment, and the contraction ofmanufacturing output. The consensus in the profession, which persists to this day, is that these Consequently, the impact on inflation would not be minor. US inflation would probablysurge, as significant bottlenecks and disrupted supply chains might revisit some of the tensionsobserved in the wake of the pandemic. Meanwhile, inflationary risks would be skewed to thedownside in the rest of the world (Graph 1.B), as the contraction in external demand would to As the weeks went by and policy decisions, announcements and actions zigzagged,uncertainty was added to the mix. Uncertainty was expected to sharpen the negative effects of the The outcome, so far, has been very different from these pessimistic forecasts. Global GDPgrowth remained robust, with buoyant gains in capital expenditure. In fact, the global economyfaced a material demand shock in the first half of 2025, as US consumers and corporates rushedto secure goods and inputs before tariffs came into effect. Growth remained solid in EMEs, withmanufacturing also showing signs of resilience. In the United States, there have been few signs ofa slowdown in economic activity, with private consumption and investment – largely boosted by Limited impact on realised growth and inflation To be sure, there are reasons to be concerned about the outlook for the global economy.But those are somewhat different from the reasons that many envisioned early this year. Labourmarkets have remained solid, but hiring has been sluggish in recent months. Fiscal positions,particularly in AEs, are becoming even more brittle, as political economy considerationsoverwhelm the pressing need for fiscal consolidation. Geopolitical tensions are not abating,harbouring the potential for renewed shocks that could destabilise the global economy. For some But let’s go back to trade policy: what lessons can we extract from the turbulence andresilience we have seen so far? Let me emphasise that I am not trying to pass judgment on themerit of tariffs themselves. The focus is not on the efficiency of resource allocation throughout theeconomy, their relevance as an additional source of fiscal revenue, or their effectiveness in The most obvious lesson seems to be that trade policy shocks cannot be easily mappedinto business cycle shocks. Trade policy shocks have deep sectoral reverberations. The impact is usually non-symmetric across sectors, both in the imposing and the receiving countries.2They canelicit unexpectedly forceful reactions in economic agents, whose macroeconomic implications arevery difficult to anticipate. For example, the delayed implementation of the US tariffs gave Trade policy shocks undoubtedly exacerbate the challenges faced by central banks innavigating policy trade-offs. Beyond the inherent uncertainty surrounding sectoral impacts andtheir broader macroeconomic implications, the proper policy response is very difficult to calibrate. In any case, the calibration of an adequate policy response requires a careful and data-driven assessment, which integrates – as fully as possible – all the complex nuances of this class of Traditional optimal tariff theory has provided valuable insights on this matter. One of themain implications of the theory is that large countries with market power – ie those facing a lowelasticity of import supply – can obtain significant welfare gains by imposing tariffs, usually at thecost of a worsened domestic resource allocation.4Cooperation, for instance in the form of global or regional trade agreements, improves overall welfare but implies that larger countries forgosome of their individual strategic gains in exchange for broader efficiency and stability of the Some evidence of (selected) foreign exporters absorbing tariffs Sources: National data. The US dollar