The World Bank has significantly downgraded its global growth forecast for 2025, citing rising trade tensions and economic uncertainty triggered by sweeping U.S. tariff hikes. The Bank now expects global GDP to grow by just 2.3% next year — a 0.4 percentage point cut from its January projection — marking the slowest pace outside a recession since 2008.
In its latest Global Economic Prospects report, the Bank revised growth expectations downward for nearly 70% of economies, including major markets like the United States, China, and the Eurozone. Six emerging market regions also saw lowered forecasts.
“The global economic outlook has deteriorated substantially,” the report said, pointing to escalating protectionism, financial market volatility, and growing uncertainty as major headwinds.
The downgrade comes amid a turbulent global trade environment, largely driven by U.S. President Donald Trump’s unpredictable tariff policies. Since taking office, President Trump has raised the effective U.S. tariff rate from under 3% to the mid-teens — the highest in nearly a century. Retaliatory measures from countries such as China have added to the strain on global commerce.
While the Bank does not forecast a global recession, it warned that the decade ahead could see the weakest growth since the 1960s, with global GDP expansion averaging just 2.5% through 2027.
Global trade is expected to grow by only 1.8% in 2025, a steep drop from 3.4% in 2024 and far below the 5.9% average seen in the early 2000s. Inflation is forecast to remain elevated at 2.9%, fuelled by rising tariffs and tight labour markets.
The report also cautioned that any further escalation in trade barriers — such as an additional 10-percentage point rise in U.S. tariffs with equivalent retaliation — could shave another 0.5 percentage points off global growth and trigger severe financial market instability.
Despite the bleak outlook, World Bank Deputy Chief Economist Ayhan Kose told Reuters that there is hope. “Uncertainty is like fog on a runway — it slows investment and clouds the outlook,” he said, adding that growing dialogue between the U.S. and China, along with trade realignments and technological developments, could restore momentum.
Still, the impact is already visible in individual economies. The U.S. growth forecast for 2025 was cut by 0.9 percentage points to 1.4%, and the eurozone and Japan were both downgraded to just 0.7%.
Emerging markets are expected to grow by 3.8%, but low-income nations will struggle the most. The Bank warned that developing countries excluding China could take two decades to recover economic losses suffered during the 2020s.
Mexico, heavily reliant on U.S. trade, saw one of the sharpest revisions — with growth now projected at just 0.2% for 2025.
Only China’s forecast remained unchanged at 4.5%, as Beijing maintains fiscal and monetary tools to support its economy. However, even in China, long-term risks persist as global trade relationships continue to evolve.
