- A new report by the World Bank claims global economic growth could slow to its weakest level since the 1960s. The report pointed to an environment of trade obstacles and tariff policy uncertainty as the underlying reason for sluggish growth as President Donald Trump continues to threaten tariffs against America’s biggest trading partners.
A new era of global tariffs spurred by President Donald Trump could make the 2020s the slowest decade of world economic growth on average in more than 50 years, claims a new report from the World Bank.
The World Bank’s Global Economic Prospects report, published Tuesday, paints a bleak picture of the world economy over the first seven years of the 2020s—although it stopped short of predicting another global recession such as that caused by the pandemic.
The international financial institution predicted 70% of the world’s economies would see lower-than-expected growth and that overall global growth would top out at 2.3% in 2025, nearly half-a-percentage-point lower than expected at the start of the year.
Partly to blame for this slowing growth are increased trade barriers and policy uncertainty.
“The sharp increase in tariffs and the ensuing uncertainty are contributing to a broad-based growth slowdown and deteriorating prospects in most of the world’s economies,” the report states.
Although Trump was not mentioned by name in the report, one expert said the uncertainty the president has brought to U.S. Trade policy as well as the possibility that burdensome tariffs could be implemented on major trading partners could play a major role in slowing world economic growth.
Tariffs will both raise prices for businesses and consumers, causing pressure on both the demand and supply side of the economy. This effect could cause customers to spend less and businesses to supply fewer products to those consumers, effects that ripple across economies. At worst, it could lead to stagflation, the double whammy of low growth and high inflation which plagued the U.S. Economy during the 1970s, said Rebecca Homkes, a lecturer at London Business School and faculty member at Duke Corporate Executive Education.
“If tariffs to the level the administration is proposing do go into effect, it will have a tangible and noticeable impact on the economy, and the U.S. Economy has implications for the global economy,” Homkes told Coins2Day.
If countries are able to mitigate the effects of tariffs with trade deals such that tariff levels are halved from what was announced in May, a month after Trump’s so-called Liberation Day, world economic growth would increase 0.2 percentage points on average between 2025 and 2026, the World Bank wrote in its Tuesday report.
However, Homkes said the most pressing need right now is to decrease uncertainty brought on by the Trump administration’s careening policy decisions.
“Every time a tariff announcement or the possibility of a deal is announced, it’s met with a lot of skepticism that that’s going to be the same one in a few weeks, let alone a few years. So this level of uncertainty makes it incredibly difficult to plan, to model, to think about future growth, future jobs, hiring, et cetera,” said Homkes.
