Global economy survives tariff shock: UN

Global economic growth is forecast to decline to 2.7 per cent in 2026 from 2.8 per cent last year before increasing to 2.9 per cent in 2027 - still down from the pre-pandemic average ⁠of 3.2 per cent between 2010 and 2019, according to a United Nations report.

The World Economic Situation and Prospects report said while a sharp increase in US tariffs in 2025 created new trade tensions, the absence of broader escalation has helped limit disruptions to international commerce.

"Despite the tariff shock, global economic activity proved resilient, supported by front-loaded shipments, inventory accumulation, and solid consumer spending amid monetary easing and broadly stable labour markets," according to the report released on Thursday by the UN Department of Economic and Social Affairs.

"Continued macroeconomic policy support is expected to cushion the impact of higher tariffs, but growth in trade and overall activity are likely to moderate in the near term," it said.

Australian growth to pick up

“Australia and the Republic of Korea are projected to see a pickup in growth in 2026, underpinned by stronger domestic demand,” the report said. 

“In Australia, real GDP growth is estimated at 1.8 per cent for 2025, compared with 1.1 per cent in 2024. The economy is projected to expand by 2.2 per cent in 2026 and 2.4 per cent in 2027,” it said. 

“Strong wage growth has supported a recovery in private consumption, while private investment has remained relatively weak even in the wake of monetary easing by the Reserve Bank of Australia starting in February 2025.”

"We are more optimistic about the US economy in 2026 because of tech spending."
- Joseph Capurso, CBA Head of Foreign Exchange, International & Geoeconomics

US economy set to slow

The report said economic growth in the United States slowed to 1.9 per cent in 2025 - from 2.8 per cent in 2024 - and was forecast to edge up to 2.0 per cent in 2026 and 2.2 per cent in 2027, aided by expansionary fiscal and monetary policies.

It said inflation would likely remain above the two per cent target in 2026, "though it should gradually moderate as tariff effects wane and housing costs stabilise".

Commonwealth Bank Head of Foreign Exchange, International & Geoeconomics Joseph Capurso said there could be more growth in US than the UN is predicting. "We are more optimistic about the US economy in 2026 because of tech spending," he said.  "We forecast US economic growth to pick up to 2.4% in 2026 compared to the UN’s forecast of 2.0%.

In China, the economy was projected to grow by 4.6 per cent in 2026 and 4.5 per cent in 2027, down from an estimated 4.9 per cent expansion in 2025.

"A temporary easing of trade tensions with the United States - including targeted tariff reductions and a one-year trade truce - has helped stabilise confidence, while policy support is expected to sustain domestic demand," the report said.

Reuters