World Bank sees US growth rate halving as tariffs slow global economy

Economic growth in the U.S. may halve this year as a result of President Trump’s tariff policies, while the global economy is set to suffer a more modest, but still significant, slowdown, the World Bank said Tuesday.

The Washington D.C.-based development bank said it expects the world’s largest economy to grow by just 1.4% in 2025, a sharp deceleration from the 2.8% expansion recorded in 2024. In its January report on the outlook for the global economy, the World Bank forecast a 2.3% increase in U.S. gross domestic product.

With the rise in duties crimping their exports to the U.S., the World Bank also lowered its forecasts for economic growth in the eurozone, Japan, India and many other countries around the globe. Among large economies, Mexico is set to suffer the biggest blow, with growth in 2025 now forecast at just 0.2%, down from 1.5% in January.

As a result, the World Bank now expects world output to grow by 2.3% this year and 2.4% the next, having previously projected an expansion of 2.7% in each year.

“Global growth prospects have deteriorated," said Indermit Gill, the World Bank’s chief economist. “Without a swift course correction, the harm to living standards could be deep."

The World Bank warned that the slowdown in both the U.S. and global economies could be more severe if tariffs were increased further from the levels that prevailed in late May, as might occur if the increases announced on April 2 and then paused for 90 days to allow for negotiations were to come into force in July.

Should duties on imports rise by a further 10 percentage points, global economic growth would be just 1.8% this year and 2% in 2026, the World Bank’s economists estimated.

“This sudden escalation in trade barriers results in global trade seizing up in the second half of this year and is accompanied by a widespread collapse in confidence, surging uncertainty, and turmoil in financial markets," the World Bank said of such a scenario.

The World Bank’s forecasts are the latest warning from an international body about the perils of Trump’s trade policy. The Organization for Economic Cooperation and Development last week said U.S. economic growth could slow to 1.6% this year, with inflation nearing 4% as a result of higher tariffs. The White House said the OECD’s report “joins a growing list of doomsday prognostications that are untethered to reality."

However, the World Bank backed Trump’s claim that the U.S. faced higher tariffs on its exports than it levied on imports prior to the recent increases, and Gill said other countries should offer to lower their duties in an effort to secure trade peace.

“This favorable access to U.S. markets was not a sustainable policy," he said. “The differences should be reduced quickly and this can only happen if everyone acts in good faith."

Indeed, in a scenario where tariffs were halved compared to their levels in late May, economic growth would be slightly higher both this year and next, the World Bank said.

But tariffs aren’t the only issue that the Trump administration has with governments around the world, and it argues that a variety of other policies discriminate against U.S. businesses. These include subsidies provided by the Chinese government to the country’s businesses, and the use of value-added taxes in Europe.

“The discussion on tariffs is important, but it’s just a start," Gill said.

The World Bank’s main concern is the damage that trade barriers and higher uncertainty are likely to inflict on developing economies, which it is tasked with supporting.

The development bank left its forecasts for China unchanged, as it expects that weaker exports to the U.S. will be offset by greater support from government spending. India’s economy is expected to continue to grow rapidly, although at a slightly slower pace than previously forecast.

A number of developing economies that weren’t growing rapidly will also see weaker expansions than had been expected, including South Africa. Many are exporters of commodities, prices for which have fallen sharply since Trump’s tariff increases led to lower expectations for global demand. While slowdowns are expected to be widespread, outright contractions are likely to be rare, with Iran seen as one notable exception.

The World Bank said this latest setback would extend a long period of lower growth for developing economies.

“Outside of Asia, you’re not seeing improved living standards," said Gill. “The developing world is becoming a development-free zone."

Write to Paul Hannon at paul.hannon@wsj.com