Global growth approximate to flatline as tariffs add to strains

The global economy is set to flatline this year amid fears including fresh US tariffs hitting trade, the globe financial institution has warned.

Growth of 2.7% would be the joint weakest act since 2019, aside from the sharp contraction seen at the height of the Covid pandemic.

It is a rate the globe can “live with” according to the financial institution’s deputy chief economist Ayhan Kose, but would not be enough to enhance people’s living standards in both richer and poorer countries.

He warned trade tariffs, which President-elect Donald Trump has threatened to introduce on imports to the US, could have worldwide economic consequences.

The prospect of higher taxes being introduced on imports to the US is concerning many globe leaders because they will make it more expensive for companies to sell their goods in the globe’s biggest economy.

Tariffs are a central part of Trump’s economic imagination – he sees them as a way of growing the US economy, protecting jobs and raising levy income – and has threatened to issue tariffs against China, Canada and Mexico on day one of his presidency next week.

The US is the globe’s largest importer. China, Mexico and Canada account for about 40% of the $3.2 trillion (£2.6tn) of goods it imports each year, according to official data.

Mr Kose said “escalating trade tensions between major economies” were one of the financial institution’s biggest fears for the global economy in 2025. The globe financial institution aims to foster long-term economic advancement.

Other worries include profit rates being kept higher for longer and increased policy uncertainty denting business confidence and resource.

The globe financial institution said even a 10% boost in US tariffs on imports from every country would reduce global financial expansion by 0.2% if countries did not retaliate. If they did, the global economy could be hit harder, Mr Kose added.

“Anytime you introduce restrictions on trade there will be adverse consequences which are most often endured by the country that introduced them,” he said.

Mr Kose said the low growth rate being approximate for the globe economy in 2025 meant living standards would not enhance “at the pace we saw in the history”.

He pointed out that in the decade before the pandemic, growth on average was more than 3% a year.

“When you look over a longer period period we ponder growth numbers will arrive down. That worries us,” he added.

financial expansion is widely seen as fundamental to reducing poverty and financing community services such as healthcare and education.

It is also key to creating the jobs and increasing pay, at a period when expense boost remains above the 2% target set by central banks in the eurozone, UK and US.

Governments around the globe are grappling with different methods of boosting financial expansion, and Mr Kose warned there no magic solutions.

“The net income is there is no ozempic for financial expansion. Countries require to ponder about what policies to implement,” he said.

In the UK, the government is looking towards the artificial intelligence industry, while in the US, Trump wants to cut taxes and regulation.

Expanding manufacturing capacity is India’s priority, but China is taking steps to boost customer spending.