The global economy began adapting to a shifting trade landscape and demonstrated resilience in H1 2025, supported by easing energy prices and front-loading trade activity. However, fresh US tariff hikes and persistent uncertainty are set to constrain global growth from H2 2025.
In Euromonitor’s Q3 2025 baseline forecasts, global real GDP growth is projected to decelerate to 2.9% in both 2025 and 2026, from 3.3% in 2024. The baseline outlook remains fragile amid various geopolitical, economic and climate risks. Despite the US achieving some trade deals with key partners, some ambiguity around specific terms and rates persists and the risk of a global trade war looms. If a pessimistic Trump tariff scenario materialises, global economic growth could be slashed by 2.1pp from the baseline in 2025-2026, as depicted by Euromonitor’s Trump Total Agenda scenario.
Fresh tariffs to dampen growth momentum in advanced economies
With real GDP growth projected at 1.3% in 2025 and 1.4% in 2026, the growth outlook for developed economies remains below 2024 levels. Rising global trade barriers, persisting policy uncertainty and geopolitical tensions continue to undermine business and consumer sentiment, while demand stagnates.
In the US, the growth forecast is revised downward to 1.6% in 2025 and 2026 as higher tariffs and policy uncertainty are expected to hit private consumption, the backbone of the US economy, harder from H2 2025. Although Trump’s fiscal boost under the One Big Beautiful Bill Act could partly offset the negative impacts of tariffs in the near term, growing inflation concerns have kept US consumer confidence lower than in 2024.
The Eurozone economy recorded stronger-than-expected growth in H1 2025, but the initial boost from front-loading ahead of US tariffs has faded. Higher US tariffs and trade uncertainty have started to weigh on exports since Q2 2025. Growth is expected to remain muted over the remainder of 2025 and 2026, with full-year expansion forecast at 1.0% and 1.2%, respectively.
The UK economy is expected to grow modestly by 1.1% amid global trade uncertainty, though a 10% tariff deal with the US puts the country in a more favourable position than its Eurozone counterparts. Japan’s real GDP growth rate is expected to improve slightly to 0.7% in 2025 from wage hikes and sustained tourism. However, the US imposition of 15% tariffs from August 2025 could harm Japan’s export competitiveness, particularly for its automotive sector.
Growth in emerging and developing markets challenged by rising trade barriers
Real GDP growth in developing and emerging economies is projected at 4.1% in 2025, remaining lower than 2024’s level, but outperforming developed countries.
China's growth forecast stands at 4.3% for 2025, representing an upward revision from the previous quarter as surging front-loading exports in early 2025 and increased stimulus support growth
Source: Euromonitor International
China’s Manufacturing Purchasing Managers Index (PMI), however, has remained below the 50-point threshold since April 2025, pointing towards slowing manufacturing activities.
Emerging economies such as Brazil, Mexico, India, Vietnam and Indonesia are expected to see growing headwinds and slowing growth prospects as US tariffs rise. India and Vietnam, however, will remain among the fastest-growing economies in 2025, supported by solid domestic demand and their governments’ efforts to position the countries as alternative manufacturing hubs beyond China.
Inflationary pressures to stay elevated in the US, easing elsewhere
Global inflation is expected to continue to decline from 6.5% in 2024 to 4.1% in 2025 and 3.5% in 2026 in Euromonitor’s Q3 2025 baseline forecasts. Lower energy prices and cooling demand remain key factors dampening inflationary pressures. OPEC+ announced a supply hike from September 2025, which can further dampen energy price pressure. Nevertheless, global inflation is subject to upside risks amid volatile US tariff rates and the risk of an escalated global trade war.
The surge in front-loading shipments in H1 2025 has helped shield US consumers from price spikes. However, US inflation is expected to increase faster in H2 2025 and reach an annual average 3.0%, on the back of the August 2025 tariff hikes while front-loading inventory runs its course.
In Europe and China, higher US tariffs can further dampen economic activity, leading to lower inflationary pressures amid a slowing economy. Inflation in the Eurozone was stable at 2.0% in June-July 2025, expected to remain at this level in the coming months. The rerouting of Chinese export goods to Southeast Asia and Europe can also put downward pressures on prices in those regions.
For more insights on the global economic outlook, read our full report, Global Economic Forecasts: Q3 2025.