World Bank Cuts Global Growth Outlook Amid Trade Uncertainty

What Happened?

The World Bank has forecast a decline in economic growth this year in the U.S. and globally amid President Donald Trump's trade wars.

According to reports, the 189-country lender predicted that the world's largest economy, currently the U.S., would experience slow growth in 2025 (1.4%) compared to 2024 (2.8%).

It marks a downgrade from the bank's previous 2.3% U.S. growth forecast in January.

The bank also expects global growth to expand only 2.3% in 2025 compared to 2.8% in 2024.

It highlights the slowest growth rate outside of full-blown recessions encountered in 2008, the Washington-based lender reported.

'The world economy today is once more running into turbulence,' World Bank chief economist Indermit Gill wrote. 'Without a swift course correction, the harm to living standards could be deep.'

Gill added that the global economy missed its chance for the 'soft landing' it appeared headed for just six months ago to tame inflation without generating serious pain.

Why it Matters

'International discord—about trade, in particular' was a heavy matter the bank pointed to amid President Trump’s aggressive trade policies.

As part of the Trump administration's universal tariff agenda, a 10% levy on global imports had been imposed increasing trade tension.

A universal tariff of 50%, except for the U.K., has also been increased on steel and aluminum as one of Trump's latest trade moves.

The White House says that the administration's actions are 'to strengthen the international economic position of the United States and protect American workers.'

But Trump's tariff actions over Washington's debt pile have reportedly impacted investor confidence in U.S. assets.

The U.S. dollar has already fallen more than 8% this year, according to reports.

Global stocks and the dollar reportedly held steady on Tuesday as trade talks between the U.S. and China continued in London.

The Chinese economy is forecast to see a 0.5% decrease at 4.5% compared to 5% growth in 2024.

Those factors include Trump's imposed trade levies on Chinese exports and China's real estate market woes due to an aging workforce.

U.S. Commerce Secretary Howard Lutnick told reporters Tuesday that discussions between the two sides were 'going well.'

It's a major pending outcome for the Trump administration as it can help relieve tensions between the world's two largest economies.

How it Affects You

On the upside, the World Bank said, 'Uncertainty and trade barriers could diminish if major economies reach lasting agreements that address trade tensions.'

Both the U.S. and China aim to accomplish key goals despite previous trade levies.

It can set the tone for further moves in order to get the global economy back on a positive trajectory.

The overall importance of beneficial relationships can still help the U.S. address its trade deficits.

Many remain on edge for a major conclusion that may determine the global direction of the economy from these two parties.