Trade Barriers Slow Global Growth to 2.3%: World Bank Warns of Economic Headwinds

The World Bank’s June 2025 Global Economic Prospects report reveals that global growth will slow to 2.3% in 2025, down from 2.8% last year and below the 2.7% forecast in January. This marks the weakest pace outside of a recession since 2008.

The Bank attributes this slowdown to a sharp rise in tariffs and persistent trade uncertainty, especially after a series of U.S. tariff hikes under President Trump. Nearly 70% of economies worldwide, including the U.S., China, and Europe, saw their growth forecasts cut.

The U.S. implemented a 10% tariff on most imports and raised tariffs on steel, aluminum, and Chinese goods—at one point to 145% before reducing them. These moves pushed the average U.S. tariff rate to its highest level in a century.

China and other partners retaliated, escalating the trade war and increasing costs for businesses and consumers. The World Bank notes that these higher tariffs and the resulting market uncertainty have become a significant drag on investment, trade, and private consumption.

World Bank Warns of Prolonged Global Slowdown

The U.S. economy is now expected to grow just 1.4% in 2025, half of last year’s pace. The euro area and Japan will see only 0.7% growth. Emerging markets and developing economies face a downgrade to 3.8% growth.

Mexico, heavily reliant on U.S. trade, will see growth near zero. Foreign direct investment in developing economies has fallen to less than half its 2008 peak.

Commodity prices are expected to drop 5% in 2025, led by oil, but the effects of trade wars and weaker global demand could push prices lower.

The World Bank warns that if trade tensions escalate further, global growth could slow by another 0.5 percentage points, and the 2020s could become the slowest decade for growth since the 1960s.

The report stresses that the greatest risks are downside: entrenched trade barriers, persistent policy uncertainty, and weaker investment. These factors threaten to widen the gap between rich and poor nations and could delay recovery for years.

The World Bank’s analysis relies on official data and model-based scenarios, with no fabricated figures or speculative claims.