Getty ImagesThe global economy is set to grow this year at its slowest pace in six years amid fears of US tariffs hitting trade, the World Bank has warned.
Growth of 2.7% would be the weakest performance since 2019, aside from the sharp contraction seen at the height of the Covid pandemic.
It is a rate the world can “live with” according to the bank’s deputy chief economist Ayhan Kose, but would not be enough to improve people’s living standards in both richer and poorer countries.
He warned trade tariffs, which President-elect Donald Trump has threatened to introduce on imports to the US, could have worldwide economic consequences.
The prospect of higher taxes being introduced on imports to the US is concerning many world leaders because they will make it more expensive for companies to sell their goods in the world’s biggest economy.
Tariffs are a central part of Trump’s economic vision – he sees them as a way of growing the US economy, protecting jobs and raising tax revenue – and has threatened to issue tariffs against China, Canada and Mexico on day one of his presidency next week.
The US is the world’s largest importer. China, Mexico and Canada account for about 40% of the $3.2 trillion (£2.6tn) of goods it imports each year, according to official data.
Mr Kose said “escalating trade tensions between major economies” were one of the bank’s biggest fears for the global economy in 2025. The World Bank aims to foster long-term economic development.
Other worries include interest rates being kept higher for longer and increased policy uncertainty denting business confidence and investment.
The World Bank said 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, the global economy could be hit harder, Mr Kose added.
“Anytime you introduce restrictions on trade there will be adverse consequences which are most often endured by the country that introduced them,” he said.
Mr Kose said the low growth rate being forecast for the world economy in 2025 meant living standards would not improve “at the pace we saw in the past”.
He pointed out that in the decade before the pandemic, growth on average was more than 3% a year.
“When you look over a longer time period we think growth numbers will come down. That worries us,” he added.
Economic growth is widely seen as fundamental to reducing poverty and funding public services such as healthcare and education.
It is also key to creating the jobs and increasing pay, at a time when inflation remains above the 2% target set by central banks in the eurozone, UK and US.
Governments around the world are grappling with different methods of boosting economic growth, and Mr Kose warned there no magic solutions.
“The bottom line is there is no ozempic for economic growth. Countries need to think about what policies to implement,” he said.
In the UK, the government is looking towards the artificial intelligence industry, while in the US, Trump wants to cut taxes and regulation.
Expanding manufacturing capacity is India’s priority, but China is taking steps to increase consumer spending.
