Global growth forecast to be worst in 6 years due to tariffs

The World Bank has warned that the global economy is set to grow at its slowest pace in six years this year amid fears US tariffs could hit trade.

Barring the sharp contraction seen at the peak of the Covid pandemic, growth of 2.7% would be the weakest performance since 2019.

According to Ayhan Köse, the bank’s deputy chief economist, this is a rate the world can live with, but it will not be enough to improve the living standards of people in both rich and poor countries.

He warned that trade tariffs, which President-elect Donald Trump has threatened to impose on imports into the US, could have economic consequences around the world.

The prospect of the US imposing higher taxes on imports is worrying many world leaders as it would make it more expensive for companies to sell their goods in the world’s largest economy.

Tariffs are a central part of Trump’s economic vision — he sees them as a way to boost the U.S. economy, protect jobs and increase tax revenues — and he plans to impose tariffs on China, Canada and Mexico on the first day of his presidency next week. Threatened to issue tariffs against him.

America is the world’s largest importer. China imports about 40% of its $3.2 trillion (£2.6tn) worth of goods each year, according to official figures.

Mr Kos said “rising trade tensions between major economies” was one of the bank’s biggest fears for the global economy in 2025. The World Bank aims to promote long-term economic development.

Other concerns include interest rates being kept high for a prolonged period and increased policy uncertainty impacting business confidence and investment.

The World Bank said that even a 10% increase in US tariffs on imports from every country would reduce global economic growth by 0.2% if countries did not retaliate. If they did so, the global economy could suffer greater damage, Mr. Kose said.

“Whenever you impose trade restrictions, there will be adverse consequences that often have to be borne by the country that imposed them,” he said.

Mr Coase said lower growth rates were being projected for the world economy in 2025, meaning living standards “will not improve at the pace we have seen in the past”.

He pointed out that in the decade before the pandemic, growth rates averaged more than 3% per year.

“When you look at the longer term, we think the growth numbers will come down. That concerns us,” he said.

Economic growth is widely considered fundamental to reducing poverty and financing public services such as healthcare and education.

It is also important for creating jobs and raising wages, at a time when inflation remains above the 2% target set by central banks in the eurozone, the UK and the US.

Governments around the world are grappling with different ways to boost economic growth, and Mr Coase warned there is no magic solution.

“The main thing is that there is no solution for economic growth. Countries need to think about what policies to implement,” he said.

Britain has a government Looking towards the artificial intelligence industryWhereas in America Trump wants to cut taxes and regulation.

Expanding manufacturing capacity is India’s priority, but China is taking steps for it increase consumer spending,