World Bank cuts global growth forecast to 2.3% as Trump's tariffs shake world trade

The World Bank has cut the global growth forecast to 2.3 per cent from 2.7 per cent for 2025.

The cut has come at a time when US President Donald Trump’s tariffs have shaken the world trade . Even though he has paused some of his tariffs for now, he has sown uncertainty in trade and disrupted supply chains with his trade war with China that have repercussions for the entire world.

While the World Bank did not mention Trump by name in its biannual Global Economic Prospects, it cited “a substantial rise in trade barriers” as a reason behind the slowdown. Chief Economist Indermit Gill said that the ongoing conditions could cause a “deep harm” if corrective actions are not taken.

“The world economy today is once more running into turbulence. Without a swift course correction, the harm to living standards could be deep,” said Gill.

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The World Bank said that the global trade growth would slow down to 1.8 per cent in 2025 from 3.4 per cent in 2024 — the annual trade growth was 5.9 per cent in 2000s for comparison.

India to be fastest-growing economy, poor countries to suffer most

India is set to be the fastest-growing major economy in the world at 6.3 per cent, according to the forecast.

However, that growth rate would be lower than 6.7 per cent the World Bank had forecast for 2025 in January. Last year, India grew at 6.5 per cent.

The World Bank said the poor countries would suffer most and would have per-capita GDP 6 per cent below pre-pandemic levels. The forecast said it could take them up to 20 years to make up for the lost growth.

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The World Bank reduced the growth forecast for the United States, the world’s largest economy, to 1.4 per cent from 2.3 per cent. Last year, the US economy grew at 2.8 per cent — double of this year’s forecast.

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The World Bank cut European Union’s (EU) growth forecast to 0.7 from 1 per cent and Japan’s to 0.7 per cent from 1.2 per cent.

China’s growth remained unchanged in the forecast at 4.5 per cent.