The World Bank has projected that the global economy will experience its slowest growth in a decade, largely due to the impact of tariffs enacted by the Trump administration. The forecast anticipates global growth of only 2.3% by 2025, with significant cuts to previous estimates affecting nearly two-thirds of countries worldwide.
Slowest Growth Projections
According to the World Bankโs latest report, released in October 2023, growth forecasts have been revised downward from earlier predictions made in January. The anticipated growth for 2027 is now projected at 2.6%, marking a 0.4% decrease from earlier expectations.
The revisions particularly affect major economies, including Japan, Europe, and the United States, which have all seen their growth outlooks downgraded due to rising trade tensions and uncertainties in the global economic landscape.
Impact of Tariffs
The World Bank attributes these declines primarily to tariffs introduced by former President Donald Trump, including a universal 10% tax on all imports and elevated tariffs on steel and aluminum. These measures have not only shaken financial markets but have also prompted a legal ruling declaring many of these tariffs illegal, despite a subsequent appeal by the Trump administration allowing them to remain in effect for the time being.
The potential for escalating trade tensions continues to weigh heavily on investor confidence and private consumption in the U.S., contributing to the downward revision of growth forecasts for 2025 and 2026.
Chinaโs Economic Stability
In contrast, the World Bank has not downgraded the growth outlook for China, noting its relative financial stability in the face of global political uncertainties. The report indicates that while China is facing significant headwinds, it appears positioned to manage the challenges better than some of its competitors.
Economic Challenges Ahead
The World Bankโs report highlights the increasing complexity of the global economic environment, stating, โAgainst the backdrop of heightened policy uncertainty and increased trade barriers, the global economic context has become more challenging.โ The organization cautioned that additional cuts to growth rates could occur if the U.S. were to escalate its tariff regime further, warning of potential inflationary pressures.
The report warns that tariffs could lead to a โseizureโ of global trade in the latter half of the year, resulting in a widespread loss of market confidence and increased turmoil within financial sectors. However, despite these challenges, the World Bank maintains that the likelihood of a global recession remains below 10%.
Broader Economic Perspectives
This report follows a similar revision by the Organisation for Economic Co-operation and Development (OECD), which has adjusted its global growth forecast down to 2.9% from an earlier estimate of 3.1%. As these institutions express growing concerns over economic trajectories, the focus now shifts to international dialogues aimed at resolving the ongoing U.S.-China trade dispute.
Recent negotiations have been taking place in London, underscoring the urgency for stakeholders to navigate these turbulent economic waters. With both organizations highlighting the same concerns, the global community remains vigilant, seeking strategies to mitigate the impact of heightened trade barriers and restore investor confidence.
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