The global economy is on track to experience its slowest decade of growth since the 1960s, largely due to the ripple effects of US-imposed tariffs under Donald Trump, the World Bank has warned.
In its latest twice-yearly Global Economic Prospects report, the bank revealed that nearly two-thirds of the world’s countries have seen downward revisions in their growth forecasts compared to the last set of predictions issued six months ago.
Global growth is now expected to reach only 2.3% in 2025—0.4 percentage points lower than the forecast made in January. For 2027, growth is projected at 2.6%.
The bank downgraded growth forecasts for major economies, including Japan, Europe and the US. These revisions follow the implementation of a universal 10% tariff on all imports into the US, alongside steeper tariffs on steel and aluminium—policies introduced after Donald Trump assumed office.
The sweeping trade measures led to sharp declines in global financial markets in early April. Although a trade ruling in May deemed most of the tariffs illegal, the Trump administration successfully appealed to keep them in place for now.
In response to mounting trade tensions and their impact on private consumption and investor confidence, the World Bank lowered its growth outlook for the US for both 2025 and 2026.
World Bank cuts global growth forecast to 2.3%, cites trade wars
Interestingly, China’s forecasts remained unchanged. The bank cited China’s strong financial buffers as a shield against the "significant headwinds" posed by the current global political climate.
"Against the backdrop of heightened policy uncertainty and increased trade barriers, the global economic context has become more challenging," the report stated. It also warned that the threat of further abrupt, trade-restrictive policies could sap market sentiment further.
The World Bank added that an escalation in US tariffs could result in even deeper cuts to global growth, warning of potential inflationary pressures.
Tariffs could also cause “global trade seizing up in the second half of this year, accompanied by a widespread collapse in confidence, surging uncertainty and turmoil in financial markets,” the report cautioned.
It, however, stopped short of forecasting a full-blown global recession, putting the likelihood at under 10%.
The report follows a similar downgrade by the Organisation for Economic Co-operation and Development (OECD), which now expects global growth to slow to a “modest” 2.9%, down from a prior estimate of 3.1%.
Meanwhile, a fresh round of US-China trade negotiations has taken place in central London, as both sides seek a resolution to the escalating trade war.
Source: With inputs from BBC