Fitch raises 2025 global growth outlook but warns of U.S. slowdown

September 10, 2025 (MLN): Fitch Ratings has moderately upgraded its world growth forecasts for 2025, citing stronger-than-expected second-quarter data, though the agency warned that evidence of a U.S. slowdown is now clearly emerging.

Global GDP growth is projected at 2.4% in 2025, up 0.2 percentage points from its June Global Economic Outlook, but well below the 2.9% recorded last year and still under long-term trends.

Fitch also nudged its 2026 forecast higher to 2.3%.

The forecast revisions reflect regional divergences. China’s outlook has been lifted to 4.7% from 4.2%, supported by fiscal easing and export resilience despite U.S. tariffs.

The eurozone’s forecast was raised to 1.1% from 0.8%, partly due to tariff front-running, while U.S. growth was inched up to 1.6% from 1.5%, though signs of economic weakness are building.

“Greater clarity about U.S. tariff hikes does not alter the fact that they are huge and will reduce global growth,” said Brian Coulton, Fitch’s chief economist.

“Evidence of a slowdown in the U.S. is now appearing in the hard data; it’s no longer just in the sentiment surveys.”

Fitch estimates the average U.S. effective tariff rate at 16%, broadly unchanged from June. While Canada, Mexico, and Europe face lower rates, Asian economies excluding China have been hit harder.

So far, the tariff shock has had only a modest pass-through to U.S. inflation, with some of the burden absorbed by weaker corporate profits.

But Fitch expects price pressures to accelerate later this year, squeezing household incomes. U.S. consumer spending has already cooled, job growth has slowed sharply amid tighter immigration, and real wage growth is expected to weaken.

The agency now expects the Federal Reserve to cut rates twice this year, in September and December, followed by three more reductions in 2026.

In contrast, the European Central Bank is unlikely to ease further, leaving little scope for the dollar to rebound after broad-based depreciation in the first half of 2025.

Meanwhile, the eurozone’s export momentum is projected to fade in the second half of this year, with German fiscal support offering some cushion in 2026.

In China, export redirection and currency depreciation have helped offset tariffs, but domestic demand remains fragile and deflationary pressures are deepening.

Long-term government bond yields in major economies, including the U.S., UK, Germany, and Japan, remain under upward pressure, which Fitch linked partly to concerns about supply.

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