The World Bank cut its global growth forecast for 2025 to 2.3%, down 0.4 percentage points from earlier estimates. It cited rising tariffs and growing uncertainty as major challenges facing almost all economies worldwide.
In its latest Global Economic Prospects report, the World Bank lowered growth projections for nearly 70% of countries, including major economies like the U.S., China, and Europe, as well as six emerging market regions. The forecast reflects the impact of increased trade barriers since U.S. President Donald Trump took office.
Trump’s tariff hikes have pushed the U.S. average tariff rate from under 3% to the mid-teens, the highest in nearly 100 years. Other countries, including China, have retaliated with their own tariffs. This escalation has hurt global trade and investment.
While the World Bank stopped short of predicting a global recession, it warned that 2025’s growth would be the weakest outside recession periods since 2008. It expects global GDP growth to average just 2.5% through 2027, the slowest pace since the 1960s.
Global trade growth is forecast to slow sharply to 1.8% in 2025, down from 3.4% in 2024 and far below the 5.9% average seen in the 2000s. This forecast assumes tariffs in place as of late May, including a 10% U.S. tariff on most imports. It does not include tariff increases postponed to July.
The World Bank also expects inflation to remain elevated at 2.9% in 2025 due to tariffs and tight labor markets.
The report warns that if U.S. tariffs rise another 10 percentage points and other countries retaliate proportionally, global trade could collapse in the second half of the year. This would cause a sharp drop in confidence, increased uncertainty, and turmoil in financial markets. Despite this risk, the chance of a global recession remains below 10%.
World Bank Deputy Chief Economist Ayhan Kose compared the current uncertainty to “fog on a runway” that slows investment and clouds the outlook. However, he noted signs of improved trade talks and adaptation in global supply chains. Trade growth could rebound modestly to 2.4% in 2026, helped by advances in artificial intelligence.
The U.S. and China are meeting in London to ease trade tensions that now include rare earth mineral restrictions, which threaten global supply chains and growth.
The World Bank cut growth forecasts for advanced economies to 1.2% in 2025, down 0.5 points from January. The U.S. forecast dropped by 0.9 points to 1.4%, with 2026 also lowered. Rising trade barriers and market volatility are expected to hurt consumption, trade, and investment.
The White House rejected the gloomy outlook, pointing to strong recent economic data, including a 25% surge in business equipment investment in early 2025, rising personal income, and positive jobs and inflation reports. It also highlighted a budget package expected to boost growth further.
The euro zone and Japan saw their growth forecasts cut to 0.7% for 2025. Emerging markets are expected to grow 3.8%, down from 4.1% earlier.
Poorer countries face the biggest challenges. By 2027, their per capita GDP could be 6% below pre-pandemic levels. For many, excluding China, it may take 20 years to recover losses from this decade.
Mexico’s growth forecast fell sharply by 1.3 points to 0.2%, reflecting its heavy trade dependence on the U.S. China’s growth forecast remained steady at 4.5%, supported by available monetary and fiscal tools.
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