World Bank Warns of Slower Growth Due to Rising Tariffs, Market Volatility

World Bank Cuts 2025 Global Growth Forecast Amid Rising Tariffs and Trade Uncertainty.

The World Bank has lowered its global growth forecast for 2025 to 2.3%, down 0.4 percentage points from its earlier estimate, citing rising tariffs and increased geopolitical uncertainty. In its latest Global Economic Prospects report, the Bank warned that these factors are acting as “significant headwinds” for nearly all economies.

Growth projections were downgraded for about 70% of countries, including major economies like the US, China, and those in the EU, as well as for all six emerging market regions. The revisions come amid mounting economic turbulence sparked by the reimposition of high tariffs under former US President Donald Trump.

Tariff Shock and Trade Slowdown
Trump’s trade policies, which raised the effective US tariff rate to its highest level in nearly 100 years, have rattled global supply chains and triggered retaliation from countries like China. The World Bank noted that these on-again, off-again tariffs have injected persistent uncertainty into global markets.

As a result, global trade growth is expected to fall to 1.8% in 2025—down from 3.4% in 2024 and far below the 2000s average of 5.9%. Inflation is forecast to remain elevated at 2.9%, driven by supply disruptions and labor market pressures.

Worst Non-Recession Growth Since 2008
Although the Bank stopped short of predicting a global recession, it noted that 2025 could mark the weakest non-recessionary growth since the 2008 financial crisis. It added that if trade tensions escalate further—with an additional 10% increase in US tariffs and reciprocal action—global GDP could fall by another 0.5 percentage points.

“Risks to the global outlook remain decidedly to the downside,” the report warned, describing the uncertainty as “fog on a runway” slowing investment and stalling recovery.

Country Highlights
United States: Growth forecast cut by 0.9 percentage point to 1.4% in 2025.

Eurozone and Japan: Both lowered to 0.7%.

Emerging Markets: Slowed to 3.8% from 4.1%.

Mexico: Growth now seen at just 0.2%, down 1.3 percentage points.

China: Forecast unchanged at 4.5%, thanks to available policy tools.

By 2027, global growth is projected to average just 2.5% annually—the slowest for any decade since the 1960s. The World Bank also warned that the world’s poorest countries could take up to 20 years to recover from the economic losses of the 2020s.

Despite these grim projections, the Bank sees potential for a modest rebound in trade by 2026 and believes innovations like artificial intelligence may help lift growth—once uncertainty clears.