Fitch Ratings has moderately raised its world growth forecasts for 2025, citing stronger-than-expected second-quarter data from major economies, though warning of headwinds from US tariffs and slowing domestic demand.
In its latest Global Economic Outlook (GEO), Fitch now projects global GDP growth of 2.4% in 2025, up 0.2 percentage points from its June forecast.
However, this still represents a significant slowdown from 2.9% in 2024 and remains below the long-term trend.
Regional Upgrades Offset Tariff Risks
China’s growth forecast has been raised to 4.7% from 4.2%, driven by strong exports and fiscal easing despite weak private demand and persistent deflation.
The eurozone is now expected to grow 1.1% instead of 0.8%, while the US projection was nudged slightly higher to 1.6% from 1.5%. Fitch also lifted its 2026 global growth forecast marginally to 2.3%.
Fitch noted that uncertainty over US trade policy has eased following a flurry of tariff announcements. Its latest estimate of the average US effective tariff rate (ETR) is 16%, consistent with June’s assumptions. Mexico and Canada face relatively lower ETRs due to stronger compliance under the USMCA, while Europe’s is slightly reduced. Asia excluding China, however, faces higher-than-expected tariffs.
“Greater clarity about US tariff hikes does not alter the fact that they are huge and will reduce global growth,” said Brian Coulton, Fitch’s Chief Economist.
US Economy Shows Signs of Cooling
Despite upward revisions, Fitch warned of an emerging slowdown in the US, citing weaker consumer spending, slowing job growth, and reduced labor force growth due to immigration constraints. Real wage growth is expected to be weighed down by higher inflation as tariff costs eventually filter through.
Although the impact on consumer prices (CPI) has been modest so far, Fitch expects tariff-related inflationary pressures to accelerate later in 2025. This will likely dampen household spending further, even as fiscal deficits help cushion demand into 2026.
China’s Exports Resilient Amid Trade Tensions
China has managed to withstand the US tariff shock better than expected, with exports supported by a depreciating exchange rate and falling prices.
However, Fitch flagged weakening domestic demand and entrenched deflation risks as challenges for Beijing’s growth trajectory.
Overall, Fitch stressed that while global growth projections have improved slightly, the combination of US tariff hikes, inflationary pressures, and structural weaknesses in major economies will keep expansion below trend in the medium term.
