The World Bank just downgraded its global economic growth forecasts by the largest margin ever—in half. They credit this downward revision almost entirely to persistent trade uncertainties. In its most recent forecast, the organization predicts that the world economy will be growing at just 2.3% in 2025. This is a dramatic decrease from its previous forecast of 3.1% for this year.
The revision reflects a broader concern over trade negotiations, particularly between the U.S. and China. The World Bank has cut its growth forecast for the United States to 1.4% in 2025, lowering it by 0.9 percentage points. Similarly, the euro area’s GDP expectations have been reduced to 0.7%, a decline of 0.3 percentage points.
Indermit Gill, the World Bank’s senior vice president and chief economist, emphasized the impact of international discord on global stability.
“International discord — about trade, in particular — has upended many of the policy certainties that helped shrink extreme poverty and expand prosperity after the end of World War II.” – Indermit Gill, senior vice president and chief economist of The World Bank Group.
The World Bank’s most recent Global Economic Prospects report lists these ongoing negotiations of the U.S. and European Union among positives. How these discussions move forward will have a major impact on our country’s economic growth. Earlier this year, U.S. President Donald Trump imposed steep tariffs on various countries in April, further complicating the landscape of international trade. In May, marathon U.S.-China negotiations resulted in a temporary reprieve from some of the recently raised levies. Despite significant progress, tensions remain between the two countries as they prepare for a new set of talks in London.
The report underscores the necessity of resolving existing trade disputes to foster a more stable economic environment.
The World Bank’s adjusted predictions hit during a time of growing global economic uncertainty. Those previously announced tariffs come into full effect in less than a month. This would amplify the strain that economies everywhere are already experiencing.
“Our analysis suggests that if today’s trade disputes were resolved with agreements that halve tariffs relative to their levels in late May, 2025, global growth could be stronger by about 0.2 percentage point on average over the course of 2025 and 2026.” – Indermit Gill.
The World Bank’s revised predictions come at a time when global economic conditions are increasingly unpredictable. The previously announced tariffs are set to take full effect in less than a month, potentially exacerbating the challenges that economies around the world are currently facing.