UN Cuts Global Growth Forecast Amid Tariffs and Trade Tensions

Updated on 16 May 2025

The United Nations has downgraded its global economic outlook for both 2025 and 2026, as surging U.S. tariffs, mounting trade tensions, and geopolitical volatility take a toll on investment confidence and output worldwide. The latest midyear report, released on Thursday, highlights rising uncertainty across economies and industries alike.

Global Growth Downgraded to 2.4% for 2025

According to the U.N.’s revised forecast, the global economy is now expected to expand by just 2.4% in 2025 and 2.5% in 2026 — a 0.4 percentage point drop for each year compared to January’s projections. This marks a notable slowdown from the 2.9% growth recorded in 2024.

“This year started with expectations for steady, if unspectacular, growth,” said Shantanu Mukherjee, director of the U.N. Department of Economic and Social Affairs. “Since then, prospects have worsened, with volatility spreading across multiple sectors.”

Poorest Economies Hit Hardest

The slowdown is hitting developing nations disproportionately. The U.N. cut its 2025 growth outlook for the least developed countries from 4.6% to 4.1%, representing a loss of billions in output for nations already battling extreme poverty. These regions house over half of the world’s population living below the poverty line.

Mukherjee warned that economic weakness in these areas will deepen inequality and limit progress on development goals.

Tariff Shock Slows U.S., China, and EU

The economic impact of U.S. tariff hikes, announced in February, is already visible across major economies:

• United States: Growth is projected to fall sharply from 2.8% in 2024 to 1.6% in 2025, with private investment and consumption expected to weaken.

• China: Growth is set to dip from 5.0% to 4.6%, weighed down by poor consumer sentiment, export challenges, and property sector stress.

• European Union: Growth is stagnant at just 1.0%, limited by higher trade barriers and softer exports.

• United Kingdom: Forecasted to slow from 1.1% to 0.9%.

India remains a bright spot, though its growth is also expected to cool — from 7.1% in 2024 to 6.3% in 2025.

Other Emerging Markets Feel the Pressure

Commodity-exporting and investment-reliant economies like Brazil, Mexico, and South Africa are also forecast to experience weaker performance due to falling demand, lower commodity prices, and subdued investment activity.

Outlook Hinges on Negotiation and Certainty

Despite the somber data, Mukherjee expressed cautious optimism. He said ongoing bilateral negotiations may lead to a reduction in tariffs — though not a full return to pre-2025 levels. Easing policy uncertainty, he added, would support better planning and decision-making for businesses and consumers.

Market Implications: Time to Adjust

For investors and traders, the U.N. forecast underscores the importance of tracking macro shifts. Global equities may remain sensitive to economic headlines, while commodity markets and EM currencies face downside risk. Volatility across assets is likely to persist unless trade dynamics stabilize.