The World Bank has downgraded its economic outlook for the United States and the rest of the world, warning that President Donald Trump’s sweeping tariffs and unpredictable trade tactics are weighing heavily on global commerce and investor confidence.
In its updated Global Economic Prospects report released Tuesday, the Washington-based institution projected that the U.S. economy will expand by just 1.4% in 2025, a sharp slowdown from the 2.8% growth recorded in 2024. That’s also a steep drop from the 2.3% forecast issued in January, reflecting the fallout from Trump’s escalation of trade tensions with key partners.
While the report avoids mentioning Trump by name, it directly blames a “substantial rise in trade barriers” for the slowdown. Trump’s policy of imposing 10% tariffs on imports from nearly every country, coupled with abrupt policy reversals and retaliatory measures by U.S. trading partners, has triggered price hikes for consumers, disrupted supply chains, and deepened global uncertainty.
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“The world economy today is once more running into turbulence,” said Indermit Gill, the World Bank’s chief economist, in the report’s preface. “Without a swift course correction, the harm to living standards could be deep.”
Globally, the World Bank now expects growth to come in at 2.3% in 2025, down from 2.8% in 2024. The bank cut 0.4 percentage points from its earlier projection, citing a combination of weaker investment, trade friction, and monetary tightening still playing out in several economies.
Fallout Beyond the U.S.
Trump’s trade war is having ripple effects far beyond American borders. Europe, China, and other major economies are all feeling the strain.
In the Eurozone, growth is expected to slow to 0.7% in 2025, down from an already tepid 0.9% last year. European exporters, especially Germany and France, have been hit by Trump’s tariff regime. Worse still, businesses are holding back on investment due to the erratic nature of Trump’s trade measures, which are often announced, postponed, or restructured without warning.
In China, growth is expected to fall from 5% in 2024 to 4.5% this year, and then down to 4% in 2026. The world’s second-largest economy is grappling not only with the trade barriers imposed by the Trump administration but also with a real estate crisis and demographic pressures as its population ages.
India, while still the fastest-growing major economy, is also seeing its momentum taper. Growth is now projected at 6.3% for 2025, down from 6.5% last year and below the 6.7% forecast earlier this year. In Japan, growth is expected to pick up slightly—from 0.2% to 0.7%—but remains well below the 1.2% that had been projected.
Rising Concern Among Global Watchdogs
The gloomy revision from the World Bank echoes warnings from other global institutions. Just last week, the Organization for Economic Cooperation and Development (OECD) also trimmed its growth forecasts for the U.S. and global economies, citing similar concerns about escalating trade barriers and policy unpredictability.
The World Bank said the global economy has lost the chance for a “soft landing” after the pandemic, where inflation could be tamed without triggering a sharp downturn. Instead, the world now risks stagnation or worse, as countries struggle to balance growth against financial stability.
“Living standards in many countries could face long-lasting damage,” the report warned, pointing to reduced household incomes, rising food prices, and weakened investor confidence as key risks.
The bank reiterated its core mission to reduce poverty and promote shared prosperity by extending grants and low-interest loans to developing countries—many of which are also facing rising debt burdens and inflationary pressures amid weaker global trade.
Unless there is a coordinated policy response to reverse the course of rising protectionism and restore investor confidence, the World Bank cautions, the global economy may remain stuck in low gear for the foreseeable future.