World Bank slashes 2025 global growth forecast amid trade tensions

The World Bank has lowered its global growth forecast for 2025 to 2.3%, warning that escalating trade tensions and policy uncertainty - particularly stemming from U.S. tariffs - pose major threats to global economic stability.

The World Bank sharply cut its global growth forecast for 2025 by 0.4 percentage point to 2.3%, highlighting rising tariffs and growing uncertainty as significant headwinds affecting almost all economies.

In its Global Economic Prospects report, the Bank revised down projections for nearly 70% of all countries - including the U.S., China, and most of Europe - as well as six emerging market regions. These downgrades come just months after the start of a new wave of trade policy shifts under U.S. President Donald Trump.

Since taking office, Trump has implemented a series of tariff hikes that have lifted the effective U.S. tariff rate from under 3% to the mid-teens - its highest in nearly 100 years. The moves have triggered reciprocal tariffs from key trading partners, most notably China.

While U.S. officials argue that increased investment and tax reforms will offset the impact, the World Bank joins other global institutions in issuing stark warnings. The report stops short of predicting a recession but notes that the projected growth would mark the weakest performance in a non-recession year since 2008.

By 2027, global GDP growth is expected to average just 2.5% - the slowest pace of any decade since the 1960s.

The World Bank also lowered its 2025 global trade growth forecast to 1.8%, down from 3.4% in 2024 and significantly below the 2000s average of 5.9%. This forecast excludes tariff increases postponed until July 9 to allow for further negotiations.

Global inflation is projected to reach 2.9% in 2025, remaining above pre-pandemic levels due to persistent tariffs and tight labor conditions.

The Bank cautioned that risks remain heavily skewed to the downside. A hypothetical 10-point increase in average U.S. tariffs - matched by proportional retaliation - could cut another 0.5 percentage point from global growth in 2025.

“An escalation in trade barriers could lead to a near-paralysis of global trade in the second half of this year,” the report warned, “accompanied by plummeting confidence, rising uncertainty, and financial market volatility.”

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