The World Bank now forecasts that the global economy will experience its slowest growth rate this decade since the 1960s—a trend attributed in part to the impact of Donald Trump’s tariff policies.
In its twice-yearly update, the Bank downgraded growth projections for nearly two-thirds of the world’s economies compared to six months ago. It now expects global output to expand by just 2.3% in 2025—0.4 percentage points lower than January’s forecast—and reach only 2.6% by 2027.
Major economies, including Japan, Europe, and the U.S., have all had their growth outlooks revised downward. January’s estimates, issued before Trump assumed office, did not account for his imposition of a blanket 10% tariff on all imports, alongside increased levies on steel and aluminum—moves that rattled financial markets in early April.
Although a trade ruling in May declared most of Trump’s tariffs unlawful, an appeal has allowed them to remain in place for now. As a result, the World Bank scaled back its U.S. growth forecasts for both 2025 and 2026, citing escalating trade tensions that are undermining investment and private consumption. China, in contrast, maintained its forecast; the Bank believes it has sufficient financial resilience to withstand the “significant headwinds” posed by global policy uncertainty.
The report warned that the global economic environment is facing “heightened policy uncertainty and increased trade barriers,” and cautioned that further uncertainty—stemming from sudden policy shifts—could deal further blows to business sentiment.
If U.S. tariffs escalate further, the Bank warned, global trade could “seize up in the second half of this year,” triggering a sharp collapse in confidence, soaring uncertainty, and turmoil in financial markets. Despite this, it stopped short of forecasting a global recession, estimating the likelihood at under 10%.
These downgrades follow a similarly sober outlook from the OECD, which recently lowered its global growth forecast to 2.9%, down from 3.1%.
Meanwhile, a new round of U.S.–China trade talks recently took place in central London, aiming to reduce tensions in the ongoing trade war.
