Fitch Ratings has predicted a slowdown in global growth, citing, the new US administration's global trade war that will also push up US inflation and delay Federal Reserve rate cuts.

“We have cut both our US 2025 growth forecast to 1.7% from 2.1% in the December 2024 Global Economic Outlook (GEO) and our 2026 forecast to 1.5% from 1.7%. These rates are well below trend and down from almost 3% annual growth in 2023 and 2024”, it disclosed.

It pointed out that fiscal easing in China and Germany will cushion the impact of higher US import tariffs, but growth in the eurozone this year will still be a lot weaker than forecast in the December GEO.

Mexico and Canada will also experience technical recessions given the scale of their US trade exposures.

“We expect world growth to slow to 2.3% this year, well below trend and down from 2.9% in 2024”, Fitch said.

“This is a downward revision of 0.3 percentage points and reflects broad-based reductions in developed and emerging economies. Growth will remain weak at 2.2% in 2026.

The size, speed, and breadth of US tariff hike announcements since January is staggering. The US effective tariff rate (ETR) has already risen to 8.5% from 2.3% in 2024 and is likely to rise further.

“Our latest economic forecasts assume a 15% ETR will be imposed on Europe, Canada, Mexico, and others in 2025, and 35% on China. This will push the US ETR to 18% this year before moderating to 16% next year as the ETR on Canada and Mexico falls to 10%. This would be highest rate for 90 years”, the UK-based firm stated.