Global and Finnish Economic Outlook

The year started well, but Trump’s “Liberation Day” ushered in massive uncertainty

Published 7.5.2025

In the first half of the year, massive uncertainty is the name of the game in the Finnish technology industry. In March, we received the first positive news from the technology industry in the TeknoBaro member survey. The economic situation seemed to be finally turning around. It had begun to look like this year would really turn out to be better than the last. Then came “Liberation Day” and all forecasts had to be thrown out. Everything is now up in the air. Due to all this massive uncertainty, investments are being delayed: this is toxic to the Finnish technology industry.

The International Monetary Fund (IMF) revised its forecasts for global economic growth markedly downward in its April World Economic Outlook compared to the previous report published in January. The global economic outlook has changed significantly in just a few months. The IMF states that a dramatic rise in political uncertainty is the main reason behind the weaker growth forecasts. An interesting wrinkle is that the IMF does not mention US President Donald Trump by name in the report. The likeliest reason for this is that the IMF fears that Trump would retaliate in one way or another if he were to be directly blamed for the economic slowdown.

In January, the IMF predicted global economic growth of 3.3 per cent for the current year. The latest forecast from April only expects growth of 2.8 per cent. A decrease of half of a percentage point in global economic growth would mean a massive decline in demand worldwide. Growth in the United States, in particular, is expected to stall dramatically. The IMF cut its growth forecast for the United States by as much as 0.9 percentage points. Such a dramatic slowdown in the world’s largest economy has major implications for the entire global economy.

The IMF also reduced its growth forecasts for the eurozone, but not by as much as for the United States. That said, the growth estimates were already at a very low level.

The situation is almost tragic because the fact is that the US economy was in very good shape at the beginning of Trump’s term. After a year of robust growth, a real boom had been forecast for both this year and the next, inflation was under control again, and the country boasted practically full employment.

In just a few months, Trump managed to turn this all upside down. According to preliminary data released last week, the first-quarter change in US GDP is 0.1 per cent negative. In other words, the massive uncertainty about the looming tariffs in itself caused the US economy to stagnate with zero growth. “Liberation Day” at the beginning of April has had considerable fallout in the financial markets, for instance. It is reasonably safe to assume that the second quarter will also be very difficult in the United States. In fact, it is starting to look likely that the world’s largest economy will slip into recession in the first half of this year.

It should be noted here that it is currently practically impossible to make forecasts about the economy.  The trend in the entire global economy depends on Trump’s decisions, which have so far seemed entirely random. Growth forecasts should thus now be taken with a large grain of salt. They are most valuable in the analysis of scenarios: if Trump decides to do this, for instance, it would mean that for the economy.

European industry continues to face difficulties

European industry has been waiting for a turn for the better for over two years. Based on purchasing managers’ indices (PMIs) in the first months of this year, there have finally been some indications of a potential turnaround. Companies’ hopes have gradually brightened, the decline in the number of personnel appears to have come to a halt, and demand has picked up.

However, the latest data from April reveals that the situation has once again weakened in some respects. In particular, expectations for the future have taken another turn for the worse. Likewise, demand seems to have dropped off again in April.

The reaction of companies is, of course, completely understandable. It is entirely to be expected that the massive uncertainty plaguing companies is reflected in business expectations.

On the other hand, based on European PMIs, it could also be concluded that although companies have reacted as expected, their reactions have not been all that strong after all. The mood could be described as being one of anxious expectation.

In the United States, PMIs have seesawed sharply during the first months of the year, indicating a high level of uncertainty. In other words, US companies are unable to determine whether the situation is good or bad. The very latest US PMI data points to a clear slowdown in growth. On the other hand, they continue to predict growth. As noted above, preliminary data indicates that the US economy contracted in the first months of the year. Companies thus seem to be more optimistic than the situation would actually warrant.

Economic forecasts are practically impossible

Making forecasts about the economy is now extremely difficult, if not impossible. Individual point estimates (such as GDP forecasts) with an accuracy of tenths of a percentage point are currently an exercise in futility. A more useful approach is to build scenarios based on certain expectations and use forecast models to assess what would happen to the economy under specific circumstances.

In early April, Trump announced sweeping tariffs on practically the whole world on what he called “Liberation Day”. Shortly after this, the US put European tariffs on hold for a while, but increased Chinese tariffs dramatically. Trump has also toyed with the idea of stripping the US Federal Reserve of its independence.

Such snap decisions that have massive consequences make it difficult to predict what lies ahead. Forecasting is also significantly hampered by the fact that changes to the rules governing global trade have extremely complex outcomes around the world.

Here is one example of the complexity of this issue: At first glance, one might think that the tariffs imposed on Europe would automatically lead to a decline in American demand for European product. However, if the tariffs are 10 per cent for Europe, 40 per cent for Asia, and 100 per cent for China, the end result from the perspective of the American customer is that Europe’s competitiveness has actually improved compared to Asian and Chinese competitors.

Despite this potential positive impact, it should go without saying that the tariffs overall have a clearly negative impact on the economy.

The economic outlook of the manufacturing industry took a downward turn in April

The results of the Business Tendency Survey published by the Confederation of Finnish Industries (EK) in April weakened slightly from the previous survey, particularly with regard to future expectations. This does not come as a surprise. That said, the outlook may have weakened less than expected. Two conclusions could be drawn from this. First, companies apparently do not yet have a clear idea of what will ultimately happen.

Second, in this climate of massive uncertainty, companies are still taking a philosophical view reminiscent of Mauno Koivisto, the former President of Finland who famously said: “If we aren’t certain about how things will turn out, let’s assume that everything will be fine.” In other words, no panic is evident among companies. Instead, the mood in the Finnish manufacturing industry is one of anxious expectation.

Uncertainty is toxic to investments – demand in the Finnish technology industry could dip in the second quarter

Despite a slight weakening in the outlook, the latest barometer data from Finland and Europe should come as a relief rather than predicting a crisis. Even so, there is cause for concern.

The Finnish technology industry manufactures many products that are categorised as investment goods. The massive uncertainty currently sowing doubt in the economy and geopolitics is utterly toxic to investments. It seems that investment decisions are now being put on hold on a broad front. In fact, there is a major risk that order intakes will be weak in the second quarter of 2025.

However, there is some hope. The basic condition of the economy and the major business cycle showed signs of improvement at the turn of the year. First-quarter order intakes in the Finnish technology industry could be described as reasonably good. Furthermore, the number of tender requests seems to have swung to growth for the first time in years. It is therefore entirely possible, perhaps even probable, that if a tolerable global compromise is reached in the tariffs dispute, investments will be started up again and the markets would see a resurgence of growth and confidence. Unfortunately, however, it seems that we will have to wait a little longer for this to happen – not that we can count on it. It is advisable to be prepared for anything.

TeknoBaro survey: General uncertainty causes greater damage than the direct impact of tariffs

Technology Industries of Finland surveyed its member companies about the effects of the trade policy storm at the turn of April and May. Forty per cent of the responding companies engage in direct exports to the United States. For the time being, the impact of both the tariffs and all the talk about them remains moderate. Around half of the companies have not yet noticed any effects. The most concerning aspect is that a third of the respondents said that customers have pushed back their investment decisions. Companies still have a wait-and-see attitude and have not yet started taking any significant actions. Some of the companies that have direct exports to the United States have already begun negotiating price changes to their contracts.

Companies estimate that potentially permanent tariffs on all trade would have a negative impact on turnover this year. It is estimated that tariffs of 10 per cent would reduce the industry’s turnover by two to three per cent. Tariffs of 25 per cent could slash as much as 7 per cent of turnover. Assessing the impacts accurately in the midst of constant changes is difficult and uncertain. However, the trend is clear: the tariffs will have a negative impact on Finnish technology companies.

What are the factors behind the negative impacts of trade war-related phenomena? We asked companies to rank various phenomena in order of importance. According to the respondents, the factors that will have a negative impact on turnover in 2025 are, in order of importance:

1. A variety of indirect effects, i.e. general uncertainty, postponed investments, weaker demand (42% of respondents identified this as the most important factor)
2. Indirect effects from customers’ exports (34% of respondents identified this as the most important factor)
3. The impact of direct US exports (24% of respondents identified this as the most important factor)

The results indicate that in addition to tariffs, the general state of uncertainty poses an even more significant problem, making companies and customers cautious.

Although the situation is chaotic and uncertain, the open-ended responses submitted by the companies highlight some sparks of hope. Trump has imposed higher tariffs on Asia than on EU countries. This might ultimately improve the competitiveness of European companies in the United States. Many companies are now actively seeking new export markets, such as in Canada, India and Latin America. Many now also see an opportunity for Europe to rise: Europe is starting to focus more on its self-sufficiency, which could increase European demand. Companies have also seen indications of a desire to come up with European alternatives to Chinese manufacturing, for example.

Technology Industries in Finland

Moderate order intakes in the technology industry in the first quarter

In 2024, the turnover of technology industry companies in Finland declined by approximately one per cent on 2023. Turnover fell in mechanical engineering and the metals industry. Turnover grew in the electronics and electrotechnical industry, information technology and consulting engineering. Turnover in Finland amounted to approximately EUR 98 billion in 2024. In 2024, revenue was depressed by both a decrease in production volumes and a decline in producer prices.
 
The monetary value of new orders in the January-March period was 25 per cent lower than in the previous quarter, but 9 per cent higher year-on-year. The slump in order intake is in large part due to a very valuable ship order recognised during the previous quarter. Despite the large negative quarterly change, the first-quarter order intake could be described as reasonably good. Order intake in the first months of the year was good compared to order intakes in earlier quarters last year.

The balance figure for April was +7. The balance figure rose and turned positive for the first time in over two years. This could be interpreted as meaning that demand is finally showing signs of improvement. Another hopeful sign is that the balance figure was positive even though the majority of the responses were received after news of the “Liberation Day” tariffs.

At the end of March, the value of order books was 1 per cent lower than at the end of December, but 7 per cent higher than in March 2024.

On the basis of order trends at the turn of the year, the turnover of technology industry companies is expected to gradually start rising during the present year.

The number of personnel employed by technology industry companies in Finland at the end of March was on a par with the end of December. At the end of March, the industry had approximately 328,000 employees. According to the personnel survey, the number of employees affected by temporary lay-off procedures at the end of March was approximately 16,000.

Recruitment of new employees remained at a moderate level in the January-March period. Recruitments totalled 8,000. Some companies were increasing their payroll, while others were hiring new employees due to retirements and employee turnover.

Technology industry employees in Finland and abroad

Personnel slightly down both in Finland and in international subsidiaries in 2024

Finnish technology industry companies employed a total of 598,000 people on average in 2024. Domestic operations accounted for 331,000 jobs, while 267,000 people worked abroad. Staff numbers in Finland decreased by 1.1 per cent last year, or approximately 3,700 people. Staff numbers in international subsidiaries decreased by 4.5 per cent, or by approximately 12,500 people.

According to the quarterly survey by Technology Industries of Finland, personnel numbers at the end of March were on a par with December 2024. At the end of March, technology industry companies employed approximately 328,300 people in Finland.

Staff numbers in international subsidiaries decreased by 11 per cent in the electronics and electrotechnical industry, 1.6 per cent in the metals industry, 19 per cent in consulting engineering, and 11 per cent in information technology. The number of employees in international subsidiaries grew by 0.8 per cent in the mechanical engineering industry. In regional comparison, personnel counts in the technology industry were down on all continents. The largest decreases were seen in the Middle East and Africa (20 per cent) and Europe (5 per cent). In Asia, the number of employees decreased by 4 per cent, in Latin America by 1.9 per cent and in North America by 0.3 per cent.

Significant business restructuring affected personnel numbers abroad again in 2024.

There have been no significant changes in the locations of staff by region in recent years. Almost half (44%) are located in Europe and more than a third in Asia (mainly China and India).

The ten largest concentrations of foreign subsidiaries in 2024, measured by number of staff, are as follows: China (40,400), India (34,000), United States (26,100), Germany (18,400), Poland (15,200), Sweden (13,700), France (9,800), United Kingdom (7,500), Norway (6,400) and Italy (6,300).

In March–April 2025, Technology Industries of Finland conducted a survey of the number of domestic and international staff employed by its member companies/foreign subsidiaries  at the end of 2024, by country. Foreign subsidiaries are companies in which the Finland-based parent company has a share of at least 50 per cent. The number of international staff can change by way of company acquisition/divestment, expansion/reduction of operations, or increase/decrease in the percentage of ownership. The number of staff in Finland by the end of March 2025 was investigated as part of the quarterly survey. Information on temporary lay-offs and recruitments was gathered separately.

Economic Outlook on technology industry’s sub-sectors

ECONOMIC OUTLOOK 2 | 2025

Information based on the situation on 7 May 2025

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Next Economic Outlook will be published 7th August 2025 at 10.00 am.

Contacts

Industry of the Future

Rautaporras Petteri

Director, Chief Economist Technology Industries of Finland

+358 503042220 petteri.rautaporras@teknologiateollisuus.fi

Industry of the Future

Mikkonen Hanne

Economist Technology Industries of Finland

+358 440296152 hanne.mikkonen@teknologiateollisuus.fi