World Bank Forecast Underscores Cost of U.S. Trade War

The global economy is projected to slow sharply this year as President Trump’s trade policy disrupts international commerce and increases economic uncertainty, the World Bank said on Tuesday in a report that underscores the toll of America’s trade war.

Despite the weakening outlook, the global economy is not expected to fall into a recession, the World Bank said. However, the trade tension is setting the stage for the weakest decade of growth since the 1960s. Economic development in many of the poorest parts of the world has come to a standstill.

Expansion in global output is forecast to slow to 2.3 percent in 2025 from 2.8 percent last year, the World Bank said in its Global Economic Prospects report. That is down from the 2.7 percent growth that it forecast in January.

“The world economy today is once more running into turbulence,” Indermit Gill, chief economist of the World Bank, wrote in the report. “Without a swift course correction, the harm to living standards could be deep.”

The United States enacted across-the-board 10 percent tariffs on imports and 50 percent tariffs on steel and aluminum imports this year. It has also threatened “reciprocal” tariffs on dozens of trading partners and raised tariffs on Chinese imports to 145 percent before lowering them to allow for trade negotiations.

The tariffs have pushed the average effective U.S. tariff rate to the highest level in a century.

The World Bank released its new forecasts as officials from the United States and China held their second day of trade talks in London. In recent months, the world’s two largest economies have each imposed export controls limiting the other’s access to a broad range of items critical to high-technology and military applications.