• Citi economists project global growth slowing to 2.3% in 2025 from 2.8% in 2024.
  • Gradual tariff implementations have delayed full economic impacts, expected in late 2024.
  • The bank remains optimistic about long-term U.S. economic leadership despite headwinds.

A Gradual Economic Slowdown Ahead

Citigroup's economists warn that the full brunt of recent U.S. tariff policies will likely materialize in the second half of 2024, with global GDP growth expected to decelerate to 2.3% next year. The phased implementation of trade restrictions has created a false sense of resilience in markets, they note in a recent research briefing.

"What we're seeing is essentially a time-delayed effect," said one Citi analyst who asked not to be named discussing unpublished forecasts. "The supply chain reconfigurations and cost pressures take quarters to fully work through the system."

Citi's Contrasting Performance

The sobering macroeconomic outlook comes as Citigroup itself reports surprisingly strong Q1 2025 results - net income up 21% year-over-year to $4.1 billion, with particular strength in trading (up 23%) and wealth management (earnings jumping 62%). CEO Jane Fraser struck an optimistic tone during the earnings call, emphasizing that "the U.S. will remain the world's leading economy" despite current trade tensions.

Market observers note the apparent contradiction between Citi's bullish institutional performance and its cautious economic projections. "Banks often thrive in volatile environments," explained a London-based strategist. "Their trading desks profit from dislocation while their economists warn about the broader consequences."

The Tariff Timeline

Citi's analysis suggests policymakers may have underestimated how gradually the tariffs would impact growth. The economists note that many companies front-loaded orders and adjusted supply chains before restrictions took full effect, creating a temporary buffer. With inventory cycles now normalizing and alternative sourcing options proving costly, the second half of 2024 could see pronounced slowdowns in trade-dependent sectors.

Private credit markets may benefit as companies seek alternative financing amid tighter bank lending standards, according to sources familiar with Citi's internal discussions. The bank's own restructuring - exiting 14 consumer markets while growing its services and wealth management arms - positions it to weather potential turbulence, analysts say.