Global Growth Could Drop to 2.9% in 2025 As Tariffs Slow Down the Economy

The global economic growth rate is expected to drop from 3.1% in 2024 to 2.9% in 2025 due to conflicts, unforeseen climate events and the impact of US tariffs.

• US real GDP growth now expected to hit 1.6%, as inflation hits 3%
• Risk of a global trade war remains a concern as US tariffs could cost companies up to USD1.2 trillion in a pessimistic scenario
• India and Southeast Asian economies to remain the world’s fastest-growing economies

Lan Ha, head of insights for Economies and Consumers at Euromonitor International, said: “The pace of global disruption has accelerated with ongoing conflicts, climate extremes and unknown future trade conditions. Volatility is now no longer some exception, it’s the new normal for global markets.”

Euromonitor’s recently published report, Market Volatility: Risks and Opportunities Ahead, warns that in a worst-case scenario, global GDP could shrink by as much as USD 3.4 trillion.

Global inflation could surge to 5.7% in 2025 in Total Trump scenario, with US entering recession by 2026

Source: Euromonitor International Macro Model

Note: Data from 2025 onwards is forecast, updated 7 July 2025

The return of protectionist US trade policies under Trump has reignited fears of a full-scale global trade war. According to Euromonitor’s Trump Total Agenda scenario, global inflation could climb to 5.3% in 2025, as supply chain disruptions and rising import costs ripple through the global economy.

In the US, the economic outlook is increasingly fragile. The country faces a growing risk of a policy-induced recession by 2026, potentially ending a decade-long stretch of economic resilience. Euromonitor International’s current forecast for US real GDP growth is of 1.6%, down from 2.1% earlier this year, while inflation is now expected to reach 3%, up from a previous estimate of 2.3%.

Supply chains and commodities continue to struggle due to ongoing conflicts and climate events

As extreme weather events and geopolitical tensions continue to disrupt global supply chains, manufacturers are shifting focus toward resilience amid uncertainty. This includes near-shoring production and developing more future-proof products. According to Euromonitor’s Macro Model, a 20–40% surge in commodity prices could push global inflation up by 1 percentage point in 2025, adding further pressure on businesses.

When “Liberation Day” scenario is factored in, the situation becomes even more critical for businesses with trade tariffs potentially costing US importers over USD 1 trillion and increasing component costs for manufacturers by 20%.

Ha stated: “Uncertainty is going to become part of the new normal. Business must develop agile responses and base their decision-making around data, scenario-planning and diversifying their supply chain. Innovation and growth are only possible when companies have a deep knowledge of their consumer-base and of the markets where they operate.”  

Asia Pacific to remain the most important region for companies seeking growth

Despite the uncertain landscape, Southeast Asian countries and India continue to offer opportunities. In India specifically, strong domestic market growth, an expanding middle class and a projected GDP growth of around 6.5% a year over the next three years are driving momentum.

In fact, leveraging on India’s economic resilience has proven to be a successful strategy for global FMCG leaders like Unilever and Nestlé, with acquisitions and new product launches happening in 2024 and expected to increase in 2025.

Visit Euromonitor’s Trump policies insights page for more information.