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Tariffs

World Bank Downgrades Global and US Economic Growth Forecasts

Strategic Insights

— 2 min read

The World Bank has reduced its forecast for global economic growth in 2023, citing disruptions to global trade resulting from President Trump's trade war. The new outlook predicts a 2.3% growth rate, down from 2.7% previously. Similarly, the forecast for US economic growth has been lowered to 1.4% from 1.8%. This represents the weakest pace of global output since 2008, excluding recessions, with the downturn largely driven by new trade barriers and policy changes. Economists at the World Bank attribute the growth slowdown to the uncertainty surrounding trade policies, which has caused businesses and consumers to hesitate.

Key Takeaways:

  • The World Bank has downgraded its global economic growth forecast for 2023 to 2.3% from 2.7%, citing disruptions to global trade.
  • The forecast for US economic growth has been lowered to 1.4% from 1.8% due to the uncertainty surrounding trade policies.
  • The downturn in global growth represents the weakest pace since 2008, excluding recessions, with new trade barriers and policy changes being the primary drivers.
  • The 10% general tariff on imports from most countries, a 30% tariff on imports from China, and a 25% tariff on some imports from Canada and Mexico are currently in place.
  • Small business uncertainty has increased, with the National Federation of Independent Business survey measuring 94 in May, down from 110 in October last year.
  • The overall US tariff level is between 10% and 15%, marking the highest level in a century, although it has decreased significantly from a high of nearly 125% during the US-China trade dispute.
  • The World Bank's forecast assumes a 10%-15% tariff rate effective throughout 2023, but economists acknowledge "notable uncertainty" in this regard due to ongoing trade negotiations.
  • Economists at the World Bank have said that the sharp increase in tariffs and ensuing uncertainty are contributing to a broad-based growth slowdown and deteriorating prospects in most of the world's economies.
  • Small business optimism in May was above the 51-year average after seeing a huge drop in April.

Statistics:

  • Global economic growth forecast for 2023: 2.3% (down from 2.7% previously)
  • US economic growth forecast for 2023: 1.4% (down from 1.8% previously)
  • Level of small business uncertainty: 94 (May) / 110 (October)
  • US tariff level: between 10% and 15%
  • US tariff level during US-China trade dispute: nearly 125%
  • Small business optimism: above the 51-year average in May

Sources:

  • The World Bank
  • National Federation of Independent Business

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