The World Bank has sharply downgraded its global economic growth forecast for 2025, projecting expansion of just 2.3%, down from 2.8% in 2024. This slowdown is largely attributed to escalating trade tensions and tariff hikes initiated under President Donald Trump’s administration, which have disrupted international trade and heightened uncertainty across nearly all economies.
In its latest Global Economic Prospects report, the World Bank highlighted that nearly 70% of countries—including major economies like the United States, China, and Europe—have seen their growth forecasts cut. The U.S. economy is expected to grow at a sluggish 1.4% in 2025, roughly half its 2024 pace, as tariffs on imports have surged from below 3% to mid-teens, the highest in nearly a century. Retaliatory measures from China and other trading partners have further compounded the economic headwinds.
The report warns that the current trajectory marks the slowest pace of global growth outside of recession since 2008, with global trade growth expected to slow dramatically to 1.8% in 2025 from 3.4% in 2024. This deceleration reflects the fragmentation of markets and a sharp rise in policy uncertainty driven by trade disputes. Inflation is forecast to remain elevated at 2.9%, sustained by tariff-induced cost pressures and tight labor markets.
World Bank Chief Economist Indermit Gill emphasized the risks, noting that without a swift policy course correction, the damage to living standards could be severe. The report cautions that a further 10-percentage point increase in U.S. tariffs, coupled with proportional retaliation, could shave an additional 0.5 percentage point from global growth and trigger a collapse in trade and financial market confidence.
Despite these challenges, the World Bank does not foresee an imminent global recession, estimating the risk at less than 10%. However, it projects that global GDP growth will average just 2.5% through 2027, the slowest decade of expansion since the 1960s. Emerging markets and developing economies are expected to grow moderately, but many regions outside Asia face stagnation.
The outlook underscores the urgent need for de-escalation in trade conflicts and renewed international cooperation to support sustainable global growth and stability.
