Global Economic Growth Slows Amid Persistent Trade Tensions

Strategic Insights -

Persistent uncertainty over trade policy and supply chain disruptions has weighed heavily on the world's economic output, according to the International Monetary Fund's latest World Economic Outlook report. While the global economy has shown resilience, with growth stronger than expected in 2025, the impact of trade tensions is expected to become more apparent in the coming years. The report projects a slowdown in global economic growth to 3.2 percent in 2025 from 3.3 percent last year, with growth projected to fall to 3.1 percent in 2026.

Key Takeaways:

  • The International Monetary Fund projects global economic growth to slow to 3.2 percent in 2025 from 3.3 percent last year.
  • Growth is expected to fall to 3.1 percent in 2026, as protectionist measures being adopted in the United States and around the world take hold.
  • The world economy is slightly stronger than economists at the I.M.F. expected it would be earlier this year, due to the scaling back or delaying of tariffs by the United States and businesses stocking up on goods before tariffs took effect.
  • Significant uncertainty remains, with new tariffs on imported furniture, kitchen cabinets, and lumber going into effect on Tuesday and trade tensions between the United States and China flaring again.
  • A protracted shutdown of the federal government in the United States could also weigh on the world's largest economy this year.
  • In the United States, growth is projected to slow to 2 percent this year from 2.8 percent in 2024.
  • Japan's economy is poised to strengthen this year, with output rising 1.1 percent, compared with 0.1 percent last year.
  • In China, growth is forecast to slow to 4.8 percent this year from 5 percent in 2024.

Statistics:

  • Global economic growth is projected to slow to 3.2 percent in 2025 from 3.3 percent last year.
  • Growth is expected to fall to 3.1 percent in 2026.
  • Growth in the United States is projected to slow to 2 percent this year from 2.8 percent in 2024.
  • Japan's economy is poised to strengthen this year, with output rising 1.1 percent, compared with 0.1 percent last year.
  • In China, growth is forecast to slow to 4.8 percent this year from 5 percent in 2024.

Sources:

  • International Monetary Fund, World Economic Outlook Report
  • World Trade Organization, forecast on slower trade growth in 2026
  • Eswar Prasad, former head of the I.M.F.'s China division and author of a new book on the global economy.