WASHINGTON — U.S. President Donald Trump’s trade wars are expected to slash economic growth this year in the United States and around the world, the World Bank forecast Tuesday.
Citing “a substantial rise in trade barriers’’ but without mentioning Trump by name, the 189-country lender predicted that the U.S. economy – the world’s largest – would grow half as fast (1.4 per cent) this year as it did in 2024 (2.8 per cent). That marked a downgrade from the 2.3 per cent U.S. growth it had forecast back for 2025 back in January.
The bank also lopped 0.4 percentage points off its forecast for global growth this year. It now expects the world economy to expand just 2.3 per cent in 2025, down from 2.8 per cent in 2024.
In a forward to the latest version of the twice-yearly Global Economic Prospects report, World Bank chief economist Indermit Gill wrote that the global economy has missed its chance for the “soft landing’’ — slowing enough to tame inflation without generating serious pain — it appeared headed for just six months ago. “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.’’
America’s economic prospects have been clouded by Trump’s erratic and aggressive trade policies, including 10 per cent taxes — tariffs — on imports from almost every country in the world. These levies drive up costs in the U.S. and invite retaliation from other countries.
The Chinese economy is forecast to see growth slow from 5 per cent in 2024 to 4.5 per cent this year and 4 per cent next. The world’s second-largest economy has been hobbled by the tariffs that Trump has imposed on its exports, by the collapse of its real estate market and by an aging workforce.
The World Bank expects the 20 European countries that share the euro currency to collectively grow just 0.7 per cent this year, down from an already lackluster 0.9 per cent in 2024. Trump’s tariffs are expected to hurt European exports. And the unpredictable way he rolls them out — announcing them, suspending them, coming up with new ones — has created uncertainty that discourages business investment.
India is once again expected to the be world’s fastest-growing major economy, expanding at a 6.3 per cent clip this year. But that’s down from 6.5 per cent in 2024 and from the 6.7 per cent the bank had forecast for 2025 in January. In Japan, economic growth is expected to accelerate this year – but only from 0.2 per cent in 2024 to a sluggish 0.7 per cent this year, well short of the 1.2 per cent the World Bank had forecast in January.
The World Bank seeks to reduce poverty and boost living standards by providing grants and low-rate loans to poor economies.
Another multinational organization that seeks to promote global prosperity — the Organization for Economic Cooperation and Development — last week downgraded its forecast for the U.S. and global economies.
Paul Wiseman, The Associated Press
