World Bank: US growth to halve as tariffs hit global economy hard
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The World Bank warns that global economic growth is set to weaken sharply, linking the downturn to escalating trade barriers.
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An undated image of World Bank Headquarters in Washington DC (AFP/File)
The World Bank has sharply downgraded its global economic growth forecast, pointing to mounting trade tensions and sweeping tariffs imposed by US President Donald Trump as key factors behind the projected slowdown.
In its latest global economic report, released Tuesday, the bank painted a concerning picture of declining Gross Domestic Product (GDP) across much of the world.
"In short, many of the forces behind the great economic miracle of the last 50 years, when per capita GDP in developing countries nearly quadrupled and more than 1 billion people escaped extreme poverty, have swung into reverse," the report stated.
The institution stopped short of forecasting a global recession, but warned that economic expansion is expected to be the weakest outside a recession since the 2008 financial crisis. The new outlook comes as Trump’s controversial tariff policies, announced under the banner of “Liberation Day,” begin to show measurable economic consequences.
US growth cut in half
Three months after Trump called for a baseline 10% tariff on all imports and punitive rates as high as 145% on Chinese goods, the Treasury Department reported a sharp rise in collections. Tariff revenue in April reached $15.9 billion, up from $9.6 billion in March. However, the economic gains appear limited in scope.
While the World Bank did not name Trump directly, its latest Global Economic Prospects report cited a "substantial rise in trade barriers" as a key reason behind downgraded forecasts. It now expects the US economy to grow by just 1.4% in 2025, half the pace of 2024, when it expanded by 2.8%. This marks a significant revision from the Bank’s January projection of 2.3% growth.
Michael Ryan, founder of MichaelRyanMoney.com, noted, “It isn't theoretical anymore. It's measurable damage. The economy already contracted 0.3% in Q1... That translates to $180 billion in lost economic output every year. That’s the equivalent of losing an entire state's economic contribution.”
Globally, economic output is expected to rise by just 2.3% in 2025, down from 2.8% last year. The decline reflects a widespread pullback in trade and investment as countries respond to volatile US trade policy and escalating tensions with key partners such as China and the European Union.
Economists highlight risks to households, trade partners
The World Bank emphasized that ongoing protectionist policies could deepen risks to living standards and fuel volatility across global markets.
In a foreword to the report, World Bank chief economist Indermit Gill said the world has missed its opportunity for a “soft landing", where inflation is contained without triggering deeper economic damage. “The world economy today is once more running into turbulence,” Gill wrote. “Without a swift course correction, the harm to living standards could be deep.”
Consumer inflation in the US has risen by 2.4% overall. “When your grocery bill becomes a political statement, you know policy has crossed into daily life territory,” said Ryan. Meanwhile, increased costs of imported goods and retaliatory tariffs by other countries have restricted US exports, raising alarm among economists and trade analysts alike.
Financial literacy instructor Alex Beene added, “Tariffs could dramatically affect the economic growth of the United States in the coming months and even years through two pivotal factors: higher prices for American consumers and concern internationally about the country's financial outlook.”
Pressure mounts on Trump administration to adjust course
The Trump administration has begun walking back certain tariff provisions to ease negotiations. In April, several broad tariffs were suspended, and the White House announced a preliminary trade agreement with the United Kingdom, with more negotiations expected before July deadlines.
Still, the administration remains divided on the long-term strategy. Treasury Secretary Sarah Bessent has hinted that the tariffs are part of an ongoing negotiation, while trade advisor Peter Navarro stated unequivocally that “this is not a negotiation.” Ryan commented, “We’re essentially running two economic experiments simultaneously, and both have ugly endings.”
Even if the tariffs were to raise over $5 trillion across a decade, Ryan argues, “They're twice as economically damaging as simply raising corporate taxes to achieve the same revenue. We're choosing the most destructive path to the same fiscal destination.”
Broader global slowdown: China, eurozone, India affected
The ripple effects of Trump’s economic policy are evident beyond US borders. In China, GDP growth is forecast to decelerate to 4.5% in 2025, down from 5% last year, and is expected to fall again to 4% in 2026. The downturn is being driven by a combination of US tariffs, ongoing property sector instability, and structural-demographic challenges.
Europe
Across Europe, the 20 nations using the euro are projected to grow just 0.7% in 2025, a decline from the modest 0.9% pace recorded in 2024. European exports have been directly affected by the US tariff regime, and business investment has suffered amid persistent uncertainty over whether new trade measures will be announced or withdrawn.
Gill reiterated that the global economy is entering turbulent territory, “The world economy today is once more running into turbulence... Without a swift course correction, the harm to living standards could be deep.”
Beene concluded, “Pair that with concern on fluctuating tariff rates internationally... It’s easy to see why there is more worry than optimism.”
India
India continues to lead the world’s major economies in growth, with an expected 6.3% expansion this year. However, that figure is also lower than previous forecasts, down from 6.5% in 2024 and from 6.7% projected earlier for 2025. Japan’s economy is set to pick up slightly from 0.2% growth in 2024 to 0.7% in 2025, though that remains below the World Bank’s earlier 1.2% forecast.
The World Bank, a multilateral institution focused on reducing poverty and supporting economic development through low-interest loans and grants, issued its findings just days after another global economic body, the Organization for Economic Cooperation and Development (OECD), also downgraded its projections for both the US and world economies.
As trade tensions show little sign of resolution, concerns are growing that Trump's unpredictable tariff policy, including abrupt announcements, reversals, and new levies, will continue to depress global business confidence and dampen growth prospects well into 2026.
