Fitch slashes global growth forecasts amid trade wars

LONDON

Fitch Ratings dropped a grim March update to its Global Economic Outlook, warning that a U.S.-led trade war will drag down global growth.

In a new report, Fitch blames new U.S. tariffs for slowing economies, hiking US inflation, and delaying Federal Reserve rate cuts.

Global growth is set to slump to 2.3 percent this year—down from 2.9 percent in 2024—and limp at 2.2 percent in 2026, well below trend.

Last December, Fitch had pegged 2025 at 2.6 percent.

The U.S. isn’t spared either: its growth is now seen at 1.7 percent this year (down from 2.1 percent) and 1.5 percent next year (from 1.7 percent), lagging its near-3 percent pace of recent years.

The report flags big uncertainty over how far U.S. tariffs will go, with a full-blown trade war looming.

Higher tariffs will jack up U.S. consumer prices, cut real wages, and squeeze firms, while policy chaos dents investment.

Inflation could spike 1 point, pushing Fed rate cuts to late 2025—just one this year, three in 2026.

Europe’s hurting too. The Eurozone’s 2025 growth got slashed from 1.2 percent to 0.7 percent, and 2026 from 1.3 percent to 1.1 percent.

Mexico and Canada, tied tight to U.S. trade, face technical recessions, with growth forecasts cut to 0 percent and 0.3 percent this year.

China’s holding at 4.4 percent this year and 4 percent next, thanks to fiscal easing.

Türkiye’s outlook stays steady at 2.6 percent this year and 3.5 percent in 2026.

Germany’s ‘AAA’ rating faces pressure

Fitch also warned that Germany’s top-tier "AAA" credit score could take a hit long-term if its hefty borrowing for infrastructure and defense isn’t balanced with reforms or lasting growth.

The alert comes as Germany’s parliament greenlit a game-changing plan: a 500-billion-euro fund for infrastructure and climate, plus a constitutional tweak to exempt defense spending from the "debt brake" rule.

The move unlocks major cash flow for Europe’s biggest economy, aiming to jolt growth and boost the Eurozone.

Fitch’s report, titled "German Spending Plans Show Willingness to Use Fiscal Space for Geopolitical, Growth Challenges," says the extra funds could lift competitiveness and spark economic activity.

But it’s not a magic fix—without structural reforms and focus on high-impact sectors, long-term growth won’t budge much, the agency cautioned.

Over the next decade, Germany could pump in 900 billion to 1 trillion euros—over 20 percent of its 2024 GDP.

Fitch predicts a modest 0.4-point GDP bump between 2025 and 2027.