US economy forecast upgraded as tariff impacts lessen

The World Bank has revised its growth forecast for the United States, projecting a 2.2 per cent increase for this year. This revision marks a 0.6 percentage point rise, reflecting a more optimistic outlook amid ongoing tariff concerns. Analysts suggest that the impact of President Trump’s tariffs has been less severe than initially anticipated.

The forecast represents the largest upward revision for any country since the World Bank’s previous projections in June. Strong economic performance is attributed to surging spending in artificial intelligence and other sectors.

In an updated report, the World Bank highlighted that advanced economies have displayed considerable resilience, despite trade tensions and uncertainties in policy. The immediate effects of these factors have proven less disruptive than expected.

Trade policy changes have been managed efficiently, with businesses anticipating tariffs and adjusting their operations accordingly. Measures such as front-loading of traded goods and utilising bonded warehouses have mitigated potential adverse impacts on consumer prices.

Conversely, the outlook for China’s economy remains subdued. Projected growth sits below the Communist Party’s target of 5 per cent, at 4.4 per cent for this year. Factors influencing this downturn include lower consumer confidence and a weakened property sector.

Additionally, the eurozone is expected to see reduced growth, projected at 0.9 per cent this year, down from 1.4 per cent in 2025. Japan’s economy is slated for modest expansion of 0.8 per cent in both 2026 and 2027.

The World Bank cautioned that average global growth is forecast to fall slightly from 2.7 per cent to 2.6 per cent, despite the positive performance of the US economy. The organisation noted that the recovery from the pandemic is the most substantial rebound seen in six decades, yet average growth throughout the 2020s is set to be the weakest since the 1960s.

To prevent stagnation and joblessness, governments in both emerging and advanced economies must adopt policies that encourage private investment, liberalise trade, and rein in public expenditure. Investment in new technologies and education is also critical for sustained growth in the coming years.