12
6
that net exports will subtract from GDP growth. The main negative for trade is high
borrowing costs. The lagged effects of foreign central bankers' tightening of monetary
policies to combat high inflation will restrain spending by consumers and businesses. In
addition, geopolitical risks abound, including a broadening of the conflict with Russia and
the tense situation between Taiwan and China. Uncertainty about U.S. trade policy adds
some risk to the forecast for international trade, too. We assume that the U.S.-led trade
war does not escalate, but trade tensions will remain high and existing tariffs will remain
in place. Another obstacle to faster export growth is the U.S. dollar's high value. Some
depreciation will occur, but it will be minor.
