The global economy will see the slowest decade for global growth since the 1960s as the effect of Donald Trump’s tariffs are felt, the World Bank has predicted.
Nearly two thirds of countries in the world had their growth forecasts cut from the bank’s last set of predictions six months ago.
The bank predicts global growth of only 2.3% in 2025, which is 0.4% lower than was forecast in January, and for 2027, it predicts growth of 2.6%
Japan, Europe and the US were among those downgraded in the bank’s twice yearly report.
The bank’s last set of forecasts in January were made before Donald Trump took office.
Since then, his introduction of a universal 10% tariff on all imports into the US, as well as higher tariffs on steel and aluminium, caused financial markets to plunge in early April.
A trade ruling found the bulk of his global tariffs to be illegal in May, although the Trump administration won an appeal to keep them in place for now.
The World Bank downgraded its growth forecast for the US in both 2025 and 2026, because of escalating trade tensions rattling investor confidence as well as private consumption.
However, it did not downgrade the US’s main rival, China, which the bank said had enough financial stability to weather the “significant headwinds” from global political uncertainty.
“Against the backdrop of heightened policy uncertainty and increased trade barriers, the global economic context has become more challenging,” the report said, adding that more “sentiment-sapping policy uncertainty” would come because of the potential for “further rapid shifts” in trade-restrictive moves by countries.
The bank said there would be further cuts in growth if the US increased tariffs, and warned of rising inflation.
Tariffs could lead to “global trade seizing up in the second half of this year, accompanied by a widespread collapse in confidence, surging uncertainty and turmoil in financial markets,” the report said.
However, it stopped short of predicting a global recession, saying the chances of that were less than 10%.
The report comes after the OECD also downgraded its outlook for the world economy. It said global growth is now expected to slow to a “modest” 2.9%, down from a previous forecast of 3.1%.
In the mean time, a new round of talks aimed at resolving the trade war between the US and China has taken place in central London.
