The World Bank has cautioned that the global economy is on track to grow at its slowest rate in six years due to concerns over potential US tariffs impacting trade.
With a projected 2.7% growth, this performance would be the weakest since 2019, excluding the significant drop experienced during the peak of the Covid-19 pandemic.
The bank's deputy chief economist, Ayhan Kose, stated that this growth rate is tolerable for the world but might not suffice to raise living standards in both wealthier and poorer nations.
Highlighting the potential economic repercussions, Kose specifically mentioned the threat of trade tariffs that President-elect Donald Trump has proposed on US imports, emphasizing possible consequences on a global scale.
The imposition of higher import taxes by the US worries many global leaders as it could heighten costs for companies looking to sell goods in the world's largest economy.
Trump views tariffs as integral to his economic strategy, aiming to boost the US economy, safeguard employment opportunities, and increase tax revenue. He has indicated plans to impose tariffs on China, Canada, and Mexico at the start of his presidency.
The US tops the list of importers worldwide, with China, Mexico, and Canada contributing about 40% of the annual $3.2 trillion worth of imported goods, as per official reports.
Kose underscored "escalating trade tensions between major economies" as a leading concern for the global economy in 2025, emphasizing the World Bank's objective of promoting sustainable economic growth.
Additional worries cited include the long-term maintenance of elevated interest rates and heightened uncertainty in policymaking undermining business confidence and investment.
The World Bank estimates that a 10% increase in US tariffs across all countries would slash global economic growth by 0.2% if nations refrained from retaliating. Nevertheless, should retaliatory measures be taken, the impact on the global economy would be more severe, added Kose.
Kose cautioned that any trade restrictions introduced would invariably have adverse outcomes, typically borne by the initiating country.
Anticipating a subdued growth trajectory for the global economy in 2025, Kose noted that living standards would not progress as rapidly as observed in previous years. Acknowledging the more than 3% annual growth average pre-pandemic, Kose expressed concern over the expected decline in growth rates going forward.
Viewed as crucial for poverty reduction and financing essential public services like healthcare and education, economic growth also plays a pivotal role in job creation and wage enhancement, particularly with inflation exceeding the 2% target set by central banks in the eurozone, UK, and US.
Amid global efforts to stimulate economic growth through various strategies, Kose stressed that there are no universal solutions and emphasized the need for countries to carefully consider policy implementations.