Global Growth to Slow in 2026 as Trump's Tariffs Bite, UN Says

Global economic growth will slow to 2.7% in 2026, according to the United Nations. This represents a slight decline from an estimated 2.8% in 2025. The slowdown is attributed to the increasing impact of U.S. tariffs imposed under President Donald Trump and broader geopolitical uncertainties.

The UN released its annual World Economic Situation and Prospects report on January 8, noting that while the global economy absorbed the initial shock of Trump's tariffs in 2025, their effects are becoming more pronounced this year. Global trade growth is expected to slow from 3.8% in 2025 to 2.2% in 2026.

Inflation is expected to remain above central bank targets in 2026, though it should gradually ease as tariff impacts wane and housing costs stabilize. The U.S. is forecast to grow at 2.0% in 2026, up from 1.9% in 2025, supported by expansionary fiscal and monetary policies.

The U.S. tariffs introduced in April 2025 initially caused a shock to international trade but were not accompanied by widespread retaliation from other countries, which helped limit broader disruptions according to analysis. However, the effects are now being felt as companies and supply chains adjust. The UN report highlights that rising U.S. tariffs are likely to weigh on exports from the European Union and other trade partners, especially as geopolitical tensions persist.

China, a key target of U.S. tariffs, is projected to see its growth slow from 4.9% in 2025 to 4.6% in 2026. The report notes that a temporary easing of trade tensions has helped stabilize confidence, but ongoing policy and trade uncertainties are expected to continue to weigh on economic activity.

India's economy is forecast to grow at 6.6% in 2026, down from 7.4% in 2025, while South Asia as a whole is expected to see growth moderate to 5.6% this year.

What Are Analysts Watching Next?

Analysts are closely watching how the U.S. tariff policy affects consumer and business confidence, particularly in key export economies like China, the EU, and India. Some studies suggest that while tariffs may not have caused a significant inflation spike in 2025, they are likely to have a more lasting impact on global trade flows and business investment.

The Federal Reserve and other central banks are expected to continue monitoring inflation as it gradually moderates. The Fed's recent monetary policy statement suggested that while tariff effects have been partially offset by other factors, inflation remains a key focus.

Companies such as Helen of Troy have reported that tariffs are having a measurable impact on their profits and supply chains. The firm expects tariff-related disruptions to cost it up to $55 million in 2026, highlighting the broader economic and business challenges posed by rising trade barriers.

Meanwhile, in Asia, Vietnam posted an 8.02% growth rate in 2025 despite U.S. tariffs. The country has managed to maintain strong domestic consumption and infrastructure spending, allowing it to outperform many other emerging markets.

How Will Policy Affect Global Growth?

Policy responses will play a key role in determining the trajectory of global growth in 2026 and beyond. The U.S. has introduced tax cuts and fiscal stimulus, which are expected to provide a modest boost to the economy in the first half of the year.

However, analysts caution that the benefits of these measures may be offset by the continued drag from tariffs, particularly for small businesses and export-dependent industries. Inflation may remain a concern as households face higher costs for goods and services.

Global growth is projected to remain below pre-pandemic levels, with the UN report warning of the risk of a prolonged period of slower growth. It highlights the need for continued macroeconomic support to cushion the impact of trade tensions and other global risks.