On Thursday, the World Bank cautioned that if the U.S. imposes 10% tariffs, it could reduce global economic growth from 2.7% in 2025 by 0.3 percentage points, should trading partners retaliate. The bank also predicted a potential 0.9% reduction in U.S. growth (forecasted at 2.3% in 2025) due to retaliatory tariffs. Additionally, it mentioned a possible 0.4 percentage point growth increase in 2026 if U.S. tax cuts were extended.
President-elect Donald Trump's proposed tariffs include a 10% tariff on global imports, a 25% duty on Canadian and Mexican imports, and a 60% tariff on Chinese goods. The World Bank highlighted stagnant global growth expectations and expressed concerns over developing economies facing their weakest long-term growth outlook since 2000.
The report warned about diminished foreign direct investment in developing economies, significantly higher global trade restrictions, and lackluster growth due to debt burdens, weak investment, and climate change costs. It stated that emerging markets might lag more than 5% below their pre-pandemic trend by 2026 due to pandemic-related disruptions. Chief Economist Indermit Gil emphasized the need for domestic reforms to enhance investment and trade relations.
The report indicated a decline in economic growth in developing countries from 6% in the 2000s to around 3.5% in the 2020s, while the gap between rich and poor nations widened. The World Bank outlined concerns about potential challenges for developing economies, including policy uncertainty affecting investor confidence, trade tensions dampening growth, and inflation delaying interest rate cuts.
The organization expressed increased downside risks for the global economy, including trade-distorting measures, policy uncertainties hampering investment, and growth, and projected trade growth to stay below pre-pandemic levels in 2025-2026.