Investing.com -- Bank of America lowered its global growth outlook in a note Monday, citing the disruptive impact of escalating tariffs and mounting economic uncertainty tied to U.S. trade policy under Donald Trump.
“The Trump tariff game is evolving as expected, but the execution was more volatile than anticipated, triggering a sizable uncertainty shock with negative impact across most regions,” BofA said in a research note.
The bank now forecasts global GDP growth of 2.8% in 2025 and 3% in 2026—30 and 20 basis points lower, respectively, than previous estimates.
Roughly one-third of the downward revision is said to stem from the United States, while the rest reflects weaker outlooks for China, Japan, and emerging markets.
In the U.S., BofA sees inflation climbing and growth stalling—conditions ripe for stagflation.
“We expect a significant slowdown but not a recession, to which we assign 35% probability,” the analysts wrote.
They now project U.S. growth of just 1% in 2025, down from 2%, and expect core PCE inflation to peak at 3.5%. The bank maintains its call that the Federal Reserve will not cut rates this year, but sees 100 basis points of easing in 2026.
BofA expects moderate tariff de-escalation, including a U.S.-China deal, but with Chinese tariffs still converging to 50%. Canada and Mexico face an expected 5% effective tariff, while other nations could see rates near 10%.
China’s growth forecast was slashed to 4% in 2025—well below the official “about 5.0%” target—amid deepening deflationary pressures.
In Europe and Japan, BofA now sees lower growth and inflation due to trade headwinds and weak external demand.
“We cut our Euro area growth forecasts to 0.8% in 2025 and 1.0% in 2026,” wrote the bank.”For Japan, we now expect 0.1% growth in 2025 (down 0.9pp) and 2.4% inflation (down 0.4pp), with the BoJ remaining on hold.”
The firm also downgraded its UK growth forecast to 1.1% in 2025 and 1.3% in 2026.
Overall, BofA said its “biggest concern is an uncertainty shock that could end up having a larger and more persistent impact on investment and consumption,” adding that risks remain tilted to the downside.