World Bank cuts global growth forecast on US-led trade turmoil
The global economy is projected to stall this year after US President Donald Trump’s tariff policies upended international trade, according to the financial authority.
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The World Bank has slashed its 2025 global growth forecast, citing trade tensions and resulting policy uncertainty, as US President Donald Trump’s wide-ranging tariffs strained ties and weighed on economic outlooks.
The bank lowered its projection for global GDP growth to 2.3 percent in its latest economic prospects report, down from 2.7 percent expected in January, the latest in a series of downgrades by international organizations.
“That’s the weakest performance in 17 years, outside of outright global recessions,” said World Bank Group chief economist Indermit Gill.
Global growth and inflation prospects for this year and next have worsened because of “high levels of policy uncertainty and this growing fragmentation of trade relations,” he added.
“Without a swift course correction, the harm to living standards could be deep,” Mr Gill warned.
By 2027, the World Bank expects global GDP growth to average 2.5 per cent in the 2020s, which would be the slowest rate in any decade since the 1960s.
The gloomier projections come after Mr Trump imposed a 10 percent tariff on imports from almost all US trading partners in April - and higher rates on dozens of these economies, which he has since suspended until early July.
He also engaged in tit-for-tat escalation with China, although both countries have hit pause on their trade war and temporarily lowered these staggering duties. But a lasting truce remains uncertain.
The US economy is expected to grow by 1.4 percent this year, a sharp slowdown for the world’s biggest economy from a 2.8 percent expansion in 2024.
If US tariffs on imports rose another 10 percentage points, triggering proportional retaliation, the shock to international trade and financial markets could cut world growth by 0.5 percentage points this year, the report added.
By 2027, while the per capita GDP of high-income economies will be approximately where it was in pre-pandemic forecasts, corresponding levels for developing economies would be six percent lower.
“Except for China, it could take these economies about two decades to recoup the economic losses of the 2020s,” Gill cautioned.
This month, the Paris-based Organisation for Economic Co-operation and Development also slashed its 2025 global growth forecast from 3.1 percent to 2.9 percent, warning that President Trump’s tariffs would stifle the world economy.
This came after the International Monetary Fund in April cut its world growth expectations for this year too on the effects of Mr Trump’s levies, from 3.3 percent to to 2.8 per cent.
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IRAN WILL BEGIN NEW ROUND OF NUKE TALKS WITH US
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It came as European powers and the United States submitted a censure motion to the UN’s nuclear watchdog in an effort to ramp up pressure on Iran, in spite of Tehran’s warnings.
Iran has said it will present a counter-proposal to the latest draft from Washington, which it had criticised for failing to offer sanctions relief in return for curbs on its nuclear program.
“The next round of Iran-US indirect talks is being planned for next Sunday in Muscat,” Iranian foreign ministry spokesman Esmaeil Baqaei said in a statement on Tuesday.
CHINA-US TALKS BEGIN IN LONDON
China and the United States began a new round of trade talks in London on Monday, Beijing’s state media reported, as the world’s two biggest economies seek to shore up a shaky truce after bruising tit-for-tat tariffs.
The two sides are meeting in the historic Lancaster House, run by the UK Foreign Office, following a first round of talks in Geneva last month.
Chinese Vice Premier He Lifeng was again heading the team in London. Chinese state news agency Xinhua reported the start of the talks.
Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer are leading the US delegation, President Donald Trump said.
“The meeting should go very well,” Mr Trump said on his Truth Social platform.
His press secretary, Karoline Leavitt, told Fox News: “We want China and the United States to continue moving forward with the agreement that was struck in Geneva.”
While the UK government reiterated that it was not involved in the discussions, a spokesperson said: “We are a nation that champions free trade.”
UK authorities “have always been clear that a trade war is in nobody’s interests, so we welcome these talks”, the spokesperson added.
The talks in London come just a few days after Mr Trump and Chinese President Xi Jinping finally held their first publicly announced telephone talks since the Republican returned to the White House.
Mr Trump said the call reached a “very positive conclusion”, while Xi was quoted by Xinhua as saying “correcting the course of the big ship of Sino-US relations requires us to steer well and set the direction”.
Tensions between the two nations have soared, with President Trump accusing Beijing of violating a tariff de-escalation deal reached in Geneva in mid-May.
“We need China to comply with their side of the deal. And so that’s what the trade team will be discussing tomorrow,” Ms Leavitt said on Sunday.
A key issue will be Beijing’s shipments of rare earths - crucial to a range of goods including electric vehicle batteries and which have been a bone of contention for some time.
“Rare earth shipments from China to the US have slowed since President Trump’s ‘Liberation Day’ tariffs in April,” said Kathleen Brooks, research director at trading group XTB.
“The US wants these shipments to be reinstated, while China wants the US to rethink immigration curbs on students, restrictions on access to advanced technology including microchips, and to make it easier for Chinese tech providers to access US consumers,” she added.
In April, Mr Trump introduced sweeping worldwide tariffs that targeted China most heavily.
At one point, Washington hit Beijing with additional levies of 145 per cent on its goods, prompting China to respond with tariffs reaching 125 per cent on US goods.
After two days of talks in Switzerland, both sides agreed to slash the eye-watering tariffs for 90 days, but key differences remain - especially over China’s rare earth export restrictions.
The impact was reflected in the latest official export data released Monday in Beijing.
Exports to the United States fell 12.7 per cent in May from the previous month, with China shipping $US28.8 billion ($A44BN) worth of goods.
This was down from $US33 billion ($A 51bn in April, according to Beijing’s General Administration of Customs.
According to a spokesperson for Prime Minister Starmer, Britain’s finance minister Rachel Reeves took advantage of the talks in London to meet with her US counterpart Scott Bessent and Chinese Vice Premier He Lifeng on Sunday.
- with AFP
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Originally published as World Bank cuts global growth forecast on US-led trade turmoil
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