World Bank noted in its latest Global Economic Prospects update that in the United States, the announcement of trade policy changes did not provide much-needed clarity or reduce policy uncertainty, given the scale and scope of new tariffs, shifting timelines for their implementation, and fluid lists of exemptions. Furthermore, the implications of such large policy shifts, including potential steps that could be taken by other governments in response, remain highly unpredictable. As a result, U.S. growth is expected to decelerate sharply in 2025, to 1.4 percent.

In the euro area, the recent surge in policy uncertainty and financial volatility, as well as increases in tariffs on the European Union (EU), are set to prolong the bloc’s economic weakness, holding back a recovery in investment and trade. Growth in the euro area is projected to slow in 2025, to 0.7 percent, and remain a touch below its trend of about 1 percent, averaging 0.9 percent over 2026-27.

In Japan, growth is expected to firm from an estimated 0.2 percent in 2024 to 0.7 percent in 2025, underpinned by a rebound in consumption and the reopening of automobile plants after longer-than-expected shutdowns last year.

In China, the imposition of tariffs by the United States, the ensuing retaliation, and the subsequent partial rollback will have notable implications for the outlook of trade and broader economic activity. Economic growth is forecast to slow from 5 percent in 2024 to 4.5 percent this year—in line with previous projections, as the impact of higher trade barriers and weaker external demand is assumed to be offset by the boost from additional fiscal policy support.

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