The World Bank has warned that global growth is set to flatline this year due to rising trade tensions, including fresh US tariffs on imports. The forecasted 2.7% growth rate would be the joint weakest since 2019, except for the sharp contraction during the Covid pandemic.
Deputy Chief Economist Ayhan Kose says the world can “live with” this rate of growth but notes it’s not enough to improve living standards in richer and poorer countries. He warns that trade tariffs could have worldwide economic consequences, particularly if companies face higher taxes on imports to sell their goods in the US market.
The prospect of US tariffs on China, Canada, and Mexico is concerning world leaders, as it would make it more expensive for companies to operate globally. The US is the world’s largest importer, with 40% of its $3.2 trillion (£2.6tn) imports coming from China, Mexico, and Canada.
Kose says that escalating trade tensions between major economies are a top concern for the global economy in 2025. He also notes that interest rates may be kept higher for longer, and increased policy uncertainty could dent business confidence and investment.
A 10% increase in US tariffs on imports from every country would reduce global economic growth by 0.2%, according to Kose. “Anytime you introduce restrictions on trade there will be adverse consequences,” he said.
The World Bank’s forecast suggests that living standards won’t improve at the same pace as before, with an average growth rate of over 3% per year in the decade leading up to the pandemic. Kose warns that countries need to rethink their economic policies and find effective solutions to boost growth.
Governments around the world are exploring different methods to stimulate economic growth, including investing in artificial intelligence, cutting taxes and regulation, and expanding manufacturing capacity. However, there is no magic solution, according to Kose, who emphasizes the need for policymakers to implement effective strategies.
Source: https://www.bbc.com/news/articles/ce9n0l2p7meo