60% of developing economies will see slower growth due to tariffs

The World Bank warned on Tuesday that economic growth in the United States may drop by half this year due to President Trump’s tariffs, and the rest of the world will also see a notable slowdown.

The World Bank now predicts U.S. gross domestic product will expand by just 1.4 percent in 2025, down sharply from the 2.8 percent gain it recorded in 2024. Only five months ago, in its January outlook, the World Bank was expecting U.S. growth of 2.3 percent next year.

Higher duties on imports into the U.S. are weighing on exports from many countries. As a result, the bank has trimmed its growth forecasts not only for America but also for other major economies, including the eurozone, Japan, and India. 

China’s growth forecast remains unchanged at 4.5 percent. The eurozone and Japan are each set to expand by just 0.7 percent, trimmed by 0.3 and 0.5 points, respectively.

Mexico faces the biggest setback among large nations, with its growth forecast now at only 0.2 percent in 2025, compared with the 1.5 percent growth projected in January.

Globally, the bank now sees total global output rising by 2.3 percent this year and 2.4 percent in 2026, down from its earlier forecast of 2.7 percent for both years. “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.”

The bank cautioned that if tariffs were raised further beyond late-May levels, such as the additional increases announced on April 2, and then paused for 90 days to allow talks to continue, the slowdown could deepen. In a scenario where import duties climbed by another 10 percentage points, global growth would shrink to just 1.8 percent this year and 2.0 percent in 2026, its analysts calculate.

They added that such a sudden jump in trade barriers would cause cross-border commerce to stall in the second half of the year. It would also trigger a sharp loss of business and consumer confidence, heightened uncertainty, and turbulence in financial markets.

Fresh projections add to earlier warnings from other international bodies

Just last week, the Organization for Economic Cooperation and Development said U.S. growth might slow to 1.6 percent in 2025, and inflation could approach 4 percent because of higher tariffs. The White House dismissed that forecast as another “doomsday prognostication” that it says bears little relation to reality.

Still, the World Bank agreed with President Trump’s observation that before the recent hikes, the U.S. faced steeper duties on its exports than it imposed on imports. Gill urged other governments to cut their own levies to help restore trade stability. 

“This favorable access to U.S. markets was not a sustainable policy,” he said. “The differences should be reduced quickly and this can only happen if everyone acts in good faith.”

60% of developing economies will see slower growth due to tariffs

Several other emerging markets that were not expanding rapidly are now set to do even worse, among them South Africa. Many of these countries export raw materials, and prices for commodities have fallen sharply since the tariff increases dented global demand. The bank expects most will still grow rather than contract, though Iran is a notable exception.

“This latest setback will extend a long period of subdued progress for developing economies,” Gill said. “Outside of Asia, you’re not seeing improved living standards. The developing world is becoming a development-free zone.”

In its Global Economic Prospects report, the World Bank said it has cut growth forecasts for nearly 70 percent of all countries. It now expects almost 60 percent of developing economies to see slower growth this year, a downgrade of 0.3 percentage points from January. Low-income nations as a group are projected to grow by 5.3 percent in 2025, down 0.4 points.

Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More