The world economy is heading for its worst year since the 2008 financial crash, the World Bank has predicted, as most major economies suffered a growth downgrade due to trade tensions sparked by President Trump’s tariffs.
The UN-backed financial institution has predicted that global growth will come down to 2.3 percent this year as the effects of US tariffs are set to restrict GDP potential in more than two-thirds of countries across the world.
The downgrade to most economic powerhouses could hit British firms looking to grow overseas, with weakened demand for goods likely to curb the flow of exports.
World Bank economists said the US economic outlook had deteriorated since ‘Liberation Day’, with growth projected to “decelerate sharply” to 1.4 per cent compared to a previous forecast showing a 2.3 percent increase.
Their analysis also showed growth was expected to slow in some 60 percent of all developing economies this year, with GDP across the euro area expected to edge up by 0.7 per cent, below a recent trend of around one per cent growth.
Growth prospects hinge on US-China trade
Other major economies set to lose out include India and Saudi Arabia, which are both countries the UK is looking to increase trade with.
A damning assessment of the global economy put per capita growth across the world at one percentage point below the average seen between 2000 and 2019.
Researchers recommended that countries should “liberalise more broadly” by setting up trade and investment deals, especially with nearby countries, while governments should look at “strengthening” approaches to tax and spending.
Much of the data put together by the World Bank hinges on President Trump’s flip-flopping over tariffs as improved US trading relations with China could determine whether global growth rebounds from a slump.
The Trump administration is locked in talks with Chinese officials in London, with US commerce secretary Howard Lutnick claiming negotiations were “going well”.
An agreement struck in Geneva last month saw US tariffs on China come down to 30 per cent and reciprocal tariffs fall to ten per cent.
Representatives of both countries are engaged in discussions over the transfer of rare earth materials from China to the US.
Both countries have accused each other of violating pledges on the materials, while China has complained about the security of foreign students in the US.
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