"US tariffs could reduce global growth" - WB warns of possible retaliation from trading partners
The World Bank warned that overall US tariffs of 10% could reduce the already weak global economic growth of 2.7% in 2025, by 0.3 percentage points.
US President-elect Donald Trump has proposed a 10% tariff on global imports, a punitive 25% tariff on imports from Canada and Mexico to crack down on drugs and migrants crossing the US borders, and a 60% tariff on Chinese goods. Several countries, including Canada, have already vowed to retaliate.
The World Bank said simulations of a 10 percentage point increase in US tariffs on all trading partners in 2025 would reduce global growth by 0.2 percentage points, and proportional retaliation from other countries could worsen the situation.
The bank added that these estimates were consistent with external studies, which showed that a 10-point increase in United States tariffs could "reduce the level of US GDP by 0.4%, while retaliation by trading partners would increase the total negative impact to 0.9%. But according to the same source, US growth could also expand by 0.4 percentage points in 2026 if the tax cuts were extended.
The Bank for International Settlements warned of increasing "friction and fragmentation" in global trade, calling a broad-based trade war between Washington and other countries "a tangible risk scenario."
The World Bank's latest Global Economic Prospects report forecast flat global economic growth of 2.7% in 2025 and 2026, the same as in 2024, and added that emerging economies now face their weakest long-term growth outlook since 2000.
Global trade in goods and services, which expanded by 2.7% in 2024, is expected to average around 3.1% in 2025-2026, but will remain below pre-pandemic averages.
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