Trade war accelerates major slowdown in global economy since start of 2020s
The trade war launched by Donald Trump has been causing a significant slowdown in global economic growth, according to forecasts released by the World Bank on Tuesday, June 10. The international institution projected that the global economy will grow by 2.3% this year, compared to 2.8% in both 2023 and 2024. This figure is 0.4 percentage points lower than what was forecast back in January.
"Only six months ago, a 'soft landing' appeared to be in sight: the global economy was stabilizing after an extraordinary string of calamities both natural and man-made over the past few years," namely the Covid-19 pandemic and the war in Ukraine, said Indermit Gill, the World Bank's chief economist. "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." These forecasts are based on the assumption that tariffs will remain at their late-May levels – after Donald Trump's partial backtracking on China and following his agreement with the United Kingdom.
Based on these assumptions, the United States will be the first economy affected. Higher tariffs should push up the price of imports and cut into American consumers' spending. According to the World Bank, growth in the world's largest economy is expected to reach 1.4% in 2025, half of the 2.8% recorded in 2024. The eurozone should be less affected, but starting from a much lower base: growth there should be 0.7%, after 0.9% in 2024.
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