The World Bank also cut growth forecasts for the eurozone, Japan, India, and many other countries as higher US tariffs begin to weigh on their exports
Trade barriers are expected to significantly slow both US and global growth, with developing economies facing the steepest risks.
Global economic growth is set to slow sharply this year as US President Donald Trump’s tariff policies begin to take their toll on trade, the World Bank said on Tuesday. The US economy is expected to see its growth rate cut in half, while the rest of the world will also feel the strain, though to a somewhat lesser extent, the Wall Street Journal reported.
The Washington-based development bank now forecasts that the US economy will grow by just 1.4% in 2025, down from 2.8% last year. The new outlook marks a significant revision from its January forecast, when the World Bank had projected 2.3% US growth for the year.
Global trade faces escalating risks
The World Bank also cut growth forecasts for the eurozone, Japan, India, and many other countries as higher US tariffs begin to weigh on their exports. Among major economies, Mexico faces the sharpest downgrade, with projected growth of just 0.2% in 2025, a dramatic fall from the 1.5% forecast earlier this year.
Globally, the World Bank now expects output to grow by just 2.3% this year and 2.4% next year, both down from previous estimates of 2.7% in each year. “Global growth prospects have deteriorated,” said Indermit Gill, the World Bank’s chief economist. “Without a swift course correction, the harm to living standards could be deep.”
Tariff hikes could deepen the slowdown
The World Bank warned that if the tariff hikes paused in May are implemented in July, or if duties are raised by another 10 percentage points, the economic damage could be much worse. In such a scenario, global growth would fall to just 1.8% this year and 2% in 2026.
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The bank cautioned that this sudden escalation would lead to global trade slowing sharply in the second half of this year, triggering a collapse in business confidence, rising uncertainty, and financial market turmoil. “This sudden escalation in trade barriers results in global trade seizing up,” the report stated.
Mixed response to Trump’s trade strategy
While international organizations like the World Bank and the OECD have issued repeated warnings, the Trump administration remains defiant. The OECD last week projected US growth would slow to 1.6% this year, with inflation nearing 4%, prompting a White House response dismissing such projections as “untethered to reality.”
However, the World Bank did support Trump’s claim that the US has historically faced higher tariffs on its exports than it imposed on imports. Gill suggested that other countries should respond to the current situation by lowering their tariffs to promote a more balanced trade environment.
“This favorable access to US markets was not a sustainable policy,” Gill said. “The differences should be reduced quickly, and this can only happen if everyone acts in good faith.” The World Bank also noted that if tariffs were halved from their current levels, global growth would be marginally higher in both 2025 and 2026.
Developing economies face the greatest risks
The World Bank expressed particular concern about the impact of trade barriers on developing economies. The tariffs are expected to prolong an already extended period of low growth for many poorer nations.
China’s outlook remains unchanged, as the government is expected to counter weaker exports with increased fiscal support. India’s growth is also projected to remain strong, though slightly below previous forecasts.
However, a number of developing countries — including South Africa — are likely to experience weaker expansions, especially commodity exporters suffering from lower prices. Iran is expected to be one of the few major economies likely to contract outright.
Gill summed up the global challenge starkly: “Outside of Asia, you’re not seeing improved living standards. The developing world is becoming a development-free zone.”