Better than expected

Economists expect the global economy to expand by about 3% this year and in 2027. Their projections are based on unexpected strength shown by the private sector and governments last year despite economic shocks from U.S.-led trade disruptions and marketplace uncertainties. Experts at the International Monetary Fund (IMF) and World Bank Group revised their expectations upward after observing responses to tariff increases that began in April, continued investor optimism, and surging tech investments, particularly for AI-related projects. Worldwide economic growth has averaged about 3% each year since the pandemic rebound in 2021.

Emerging markets and developing economies in Asia, sub-Saharan Africa, Latin America, and the Caribbean will lead the future growth, analysts predict. China’s and India’s economies are expected to have the largest growth this year, but then decline at a greater rate than their Asian neighbors and global competitors in 2027. Economists project advanced economies, notably Germany, France, and Italy, will underperform their developing peers, and expand by only 1.8% this year. U.S. growth is projected to be 2.4%, slightly more than last year, and 2% in 2027.

Trade and market analysts at the IMF and World Bank were surprised that global economies, led by the United States and China, recovered so well in the five years following the 2020 recession. In those years, domestic production dropped at a greater rate than in previous recessions since 1960. World Bank economists noted nearly 90% of advanced economies are performing better than prior to COVID, although per-capita income in more than a quarter of developing economies remains below 2019 levels. The risks to the rosy projections, however, remain numerous: rising government debt levels, higher-­than-projected inflation, reduced AI investments, and economic or military disruptions to supply chains.

American businesses footing tariff bills

American businesses paid nearly all the higher tariff bills last year, according to a recent study. Economists at the Kiel Institute for the World Economy analyzed more than 25 million shipping transactions at U.S. seaports between January and November 2025 and determined that importers paid 96% of all tariffs. Foreign companies chose to not lower their costs and instead exported fewer items.

American firms, meanwhile, increased purchases before tariffs hit or accepted higher costs because of heavy reliance on foreign suppliers, competition from international buyers, and expectations that the tariffs would be temporary. Tariff rates averaged about 10% in the last nine months of 2025, triple the average monthly inflation for the same year, helping financial analysts conclude that importers absorbed most of their higher input costs. Continued tariffs may contribute to reduced profits and capital investment, slower hiring, and higher prices for consumers.