With intensifying trade tensions, the World Bank has significantly lowered its global economic growth forecast.

The World Bank released its latest Global Economic Prospects report on Tuesday, arguing that heightened uncertainty and high tariffs pose "significant headwinds" to the growth prospects of nearly all economies, leading to a substantial downward revision of its global GDP growth forecast for 2025 to 2.3%.

Specifically, the World Bank projects global GDP growth for 2025 at 2.3%, a 0.4 percentage point reduction from its earlier forecast at the beginning of the year, while global GDP growth for 2024 was 2.8%.

Since taking office, Trump has raised the US effective tariff rate from less than 3% to nearly 15%, the highest level in nearly a century, contributing to global trade tensions.

The World Bank is the latest institution to lower its growth forecast due to Trump's erratic trade policies, despite US officials' insistence that a surge in investment and impending tax cuts will offset these negative consequences.

Although the World Bank does not anticipate a recession, it expects global economic growth to be sluggish this year, which, excluding the exceptional year of 2020 (during the pandemic), will be the weakest since the global financial crisis.

The report projects global trade growth for 2025 at 1.8%, down from 3.4% in 2024. This forecast is based on tariffs in effect as of the end of May, including the US's 10% benchmark tariff on imports from most countries, but excluding the currently suspended reciprocal tariffs.

Economic models suggest that, on top of the already implemented 10% tariffs, a 10 percentage point increase in the average US tariff rate, coupled with retaliation from other countries, could further reduce global GDP growth by 0.5 percentage points in 2025.

An escalation of the tariff war would lead to a stagnation in global trade in the second half of this year... followed by a widespread collapse in confidence, a surge in uncertainty, and financial market volatility. Despite this, the World Bank states that the risk of a global recession is less than 10%.

Ayhan Kose, the World Bank's Deputy Chief Economist, said, "Uncertainty remains a powerful headwind, like fog on a runway, slowing investment and casting a shadow over the outlook."

However, Kose noted signs of increased dialogue on trade, which could help dispel uncertainty, and that supply chains are adapting to the new global trade landscape rather than collapsing. He mentioned that global trade growth could see a mild rebound to 2.4% in 2026, and that the development of artificial intelligence could also drive growth.

"We believe that uncertainty will eventually decline, and once the fog clears, the trade engine may restart, albeit at a slower pace," he said.

In developed countries, due to increased trade barriers, record-breaking uncertainty, and heightened financial market volatility, the World Bank expects the US economy to grow by 1.4% in 2025. In January this year, the institution had forecast a 2.3% growth for the US economy in 2025.

The economic outlook for the Eurozone is relatively bleak, with an expected growth rate of 0.7% this year; Japan's growth rate is expected to be 0.4% this year.

As a whole, emerging markets and developing countries are expected to grow by 3.8% this year, down from the 4.1% forecast in January. Mexico, which heavily relies on trade with the US, has seen its growth forecast for 2025 revised down by 1.3 percentage points to 0.2%.