Impact of U.S. Tariffs on Global Growth According to the World Bank
(WASHINGTON) - The World Bank warned on Thursday that the implementation of broad 10% tariffs by the United States could reduce global economic growth by 0.3 percentage points from the already modest 2.7% growth anticipated for 2025, if partner nations decide to retaliate. The tariffs, which were promises made by the new U.S. president, Donald Trump, could lead to a 0.9% decrease in growth in the U.S. — projected to be 2.3% in 2025 — if adverse reactions occur, according to economic simulations by the bank.
However, the organization highlighted that growth in the U.S. could increase by 0.4 percentage points in 2026 if tax cuts are extended, having only minor impacts at the global level. Trump, who will take office on Monday, has proposed a 10% tariff on all imports, a punitive 25% tariff on products coming from Canada and Mexico — until these countries take strong action against drugs and immigration — and a 60% tariff on Chinese goods. The latest World Bank Global Economic Prospects, released biannually, forecast stagnant global economic growth of 2.7% for 2025 and 2026, the same expected for 2024, warning that developing economies now face their weakest long-term growth outlook since 2000. The multilateral bank noted that foreign direct investment in these economies is now close to half of the levels observed in the early 2000s, and that global trade restrictions have increased fivefold compared to the 2010-2019 average. Growth in developing countries is expected to be 4% in 2025 and 2026, far below pre-pandemic projections, due to high debt burdens, lack of investment, slow productivity growth, and rising costs associated with climate change. "The next 25 years will be more complicated for developing economies than the last 25," said Indermit Gil, chief economist at the World Bank, who urged governments to implement internal reforms that encourage investment and strengthen trade relations. Growth in these nations dropped from nearly 6% in the 2000s to 5.1% in the 2010s and stabilized at an average of about 3.5% in 2020, according to bank data. It also pointed out that the gap between rich and poor countries is widening, with average per capita growth rates in developing countries —excluding China and India— being half a percentage point lower than those of wealthier economies since 2014.
It is crucial for developing countries to seek adaptation to this new economic landscape by fostering innovations in their policies to attract investment and improve productivity. Resilience and adaptability will be key to facing not only the challenges posed by international trade but also the internal pressures they face in terms of debt and development.
