The world economy is on track for its weakest year of growth since the Global Financial Crisis and its worst decade since the 1960s as Donald Trump’s trade war batters markets across the planet.
New analysis by the World Bank released this morning predicted that global growth will be just 2.3 per cent in 2025 – down from 2.8 per cent last year to the lowest level since 2008, outside of the worldwide recessions in 2009 and 2020.
It’s also a major revision of the World Bank’s numbers from earlier in the year, when it had pencilled in a much higher 2.7 per cent uptick for the year.
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That forecast was made before Trump’s inauguration and his subsequent trade war, which has seen American allies, including Australia and the United Kingdom, and other major trading partners like China slapped with tariffs.
While the World Bank’s entire 138-page report doesn’t mention the US president once by name, save for a reference to an external research paper, it makes it clear his trade tensions are one of the major drivers of weakening economic growth.
“After a succession of adverse shocks in recent years, the global economy is facing another substantial headwind, with increased trade tension and heightened policy uncertainty,” the Global Economic Prospects report states.
“This is contributing to a deterioration in prospects across most of the world’s economies.”
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Growth would improve by 0.2 percentage points if tariffs were halved, the World Bank found.
It also said that while trade tensions could ease – and the US and China have since reached an “in principle” agreement to make good on their current tariff truce – there is a greater risk that conditions will further worsen.
“Downside risks to the outlook predominate, including an escalation of trade barriers, persistent policy uncertainty, rising geopolitical tensions, and an increased incidence of extreme climate events,” the report says.
Making matters worse, growth isn’t forecast to recover to last year’s level – much less the 3.3 per cent seen in 2023 – for the foreseeable future.
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If those forecasts prove accurate, it would make the 2020s the weakest economic decade since the 1960s, when the world was under significant Cold War tensions.
“Only six months ago, a ‘soft landing’ appeared to be in sight: the global economy was stabilising after an extraordinary string of calamities both natural and man-made over the past few years,” the report states.
“That moment has passed. The world economy today is once more running into turbulence.
“Without a swift course correction, the harm to living standards could be deep.”
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