Global Projections:
The 2020s are projected to be one of the slowest decades for Global GDP growth in recent memory. There are several reasons, but this decline boils down to trade uncertainty and a rise in global conflict.
We are seeing a decrease in global GDP growth for the year 2025, with projections showing that GDP growth will drop from 2.8% to 1.4%. There was a consensus that we will see GDP growth stabilize in 2026, but it will not recover. Making the 2020s the slowest decade for GDP growth.
Countries are showing growing economic uncertainty as recent U.S. trade and tariff policies shift the global economic landscape. These changes have contributed to a slowdown in global trade growth, driven by increasing fragmentation and a lack of clarity around the U.S. approach trade going forward. As nations struggle to anticipate the direction of U.S. policy, many are holding back on investment and long-term trade commitments.
Global Trade and Tariffs:
Trade uncertainty has risen primarily as a result of President Trump’s tariff impositions. The scattered, messy, and unclear execution of these tariffs has made uncertainty for the future a larger worry than the actual material impacts of the tariffs thus far. After announcing a 90-day pause on tariffs, set to end July 9th, Trump moved the deadline to August 1st, in hopes of completing more trade deals. Thus far, only two deals have been made, with the UK and Vietnam. For other nations, however, steep tariffs pose a significant threat to key sectors. Trump’s announcement of a potential 200% tariff on pharmaceuticals, for instance, will harm Australia’s largest export to the United States.
To address the latter point, Brookings reported that apart from the energy sector, the rising tensions in the Middle East have not had larger residual effects on the macroeconomy…yet. However, the possibility of trade embargoes or the closing of the Strait of Hormuz, for example, could induce massive price shocks around the globe.
Global Conflict:
Within the 2020’s we have seen a drastic rise in global conflicts all over the world. This is causing destabilization of both global GDP growth and trade amongst countries. This is shown in the reduced Per-Capita GDP growth as well as decreased Foreign Direct Investments for corporations.
Takeaway:
Many countries are closely watching the U.S. economy, particularly the potential impact of Trump’s tariffs and the projected change in Fed leadership following Jerome Powell’s anticipated departure. While the U.S. still holds major influence over the global economy, that influence is fading as the dollar weakens. Other regions are moving to fill the gap—Europe, for example, is pushing for economic growth while increasing military investment. Meanwhile, regions without strong economic development, like parts of Africa, are being hit hard by declining foreign investment and weakening health and wellness systems. There's also growing interest in developing an alternative currency to challenge the U.S. dollar. While not immediately feasible, the fact that such discussions are happening signals a shift in global economic dynamics.