The World Bank has dramatically cut its 2025 global growth forecast, citing escalating trade tensions and the resulting policy uncertainty as key drivers.
The grim projection, released Tuesday, June 10, 2025, directly points to US President Donald Trump’s extensive tariff policies, which have strained international economic ties and cast a long shadow over global prospects.
In its latest economic prospects report, the World Bank lowered its projection for global GDP growth to a mere 2.3 percent, a significant drop from the 2.7 percent anticipated in January. This marks the latest in a series of downgrades by major international financial institutions.
“That’s the weakest performance in 17 years, outside of outright global recessions,” warned Indermit Gill, World Bank Group’s chief economist. He attributed the worsening global growth and inflation outlooks to “high levels of policy uncertainty and this growing fragmentation of trade relations,” adding a dire warning: “Without a swift course correction, the harm to living standards could be deep.”
Looking further ahead, the World Bank now projects global GDP growth to average a mere 2.5 percent in the 2020s, which would represent the slowest rate in any decade since the 1960s.
The gloomy projections coincide with Trump’s decision in April to impose a 10 percent tariff on imports from nearly all US trading partners, with even higher rates on dozens of specific economies, though these were temporarily suspended until early July.
While a tit-for-tat escalation with China has seen a temporary pause and a reduction in duties, the prospect of a lasting truce remains highly uncertain.
While the World Bank’s growth downgrade disproportionately impacts advanced economies, the report cautions that less wealthy nations face particularly challenging conditions. Gill noted that commodity prices are expected to remain suppressed in 2025 and 2026.
This creates a “very nasty combination of lower commodity prices and more volatile commodity markets” for roughly 60 percent of emerging markets and developing economies, which are commodity exporters.
The long-term outlook is even more stark for developing nations. By 2027, while per capita GDP in high-income economies is expected to roughly align with pre-pandemic forecasts, corresponding levels for developing economies could be a staggering six percent lower. “Except for China, it could take these economies about two decades to recoup the economic losses of the 2020s,” Gill cautioned.
Despite the downward revisions in GDP growth, paradoxically, inflation rates have been revised upwards, prompting Gill to urge policymakers worldwide to prioritize containing inflation risks.
However, Gill offered a glimmer of hope, asserting that “if the right policy actions are taken, this problem can be made to go away with limited long-term damage.” He specifically urged other countries, starting with the Group of 20 (G20), to rapidly reduce the “differential in tariff and non-tariff measures with respect to the US.” He emphasized a broader principle: “Every country should extend the same treatment to other countries. It’s not enough to just liberalize with respect to the US. It’s also important to liberalize with respect to the others.”
The World Bank suggested that developing economies could boost GDP growth by lowering tariffs on all trading partners and converting preferential trade deals into broader pacts covering a “full range of cross-border regulatory policies.”
This World Bank report follows similar downgrades from other major economic institutions. Earlier this month, the Paris-based Organisation for Economic Co-operation and Development (OECD) slashed its 2025 global growth forecast from 3.1 percent to 2.9 percent, explicitly warning that Trump’s tariffs would stifle the world economy.
The International Monetary Fund (IMF) had also cut its 2025 world growth expectations in April, from 3.3 percent to 2.8 percent, also citing the impact of Trump’s levies. The consensus among these leading economic bodies paints a clear picture of a global economy increasingly strained by protectionist trade policies.
