WASHINGTON – The World Bank on Thursday warned that U.S. across-the-board tariffs of 10% could reduce already lackluster global economic growth of 2.7% in 2025 by 0.3 percentage point if America’s trading partners retaliate with tariffs of their own. Such tariffs, promised by U.S. President-elect Donald Trump, could cut U.S. growth – forecast to reach 2.3% in 2025 – by 0.9% if retaliatory measures are imposed, the bank said, citing economic simulations. But it noted that U.S. growth could also increase by 0.4 percentage point in 2026 if U.S. tax cuts were extended, it said, with only small global spillovers.

Trump, who takes office Monday, has proposed a 10% tariff on global imports, a 25% punitive duty on imports from Canada and Mexico until they clamp down on drugs and migrants crossing borders into the U.S., and a 60% tariff on Chinese goods. The World Bank’s latest Global Economic Prospect report, issued twice yearly, forecast flat global economic growth of 2.7% in 2025 and 2026, the same as in 2024, and warned that developing economies now faced their weakest long-term growth outlook since 2000.

The multilateral development bank said foreign direct investment into developing economies was now about half the level seen in the early 2000s and global trade restrictions were five times higher than the 2010-2019 average. It said growth in developing countries is expected to reach 4% in 2025 and 2026, well below pre-pandemic estimates due to high debt burdens, weak investment and sluggish productivity growth, along with rising costs of climate change.

Overall output in emerging markets and development economies was expected to remain more than 5% below its pre-pandemic trend by 2026, due to the pandemic and subsequent shocks, it said. (Marketscreener)