Despite growing evidence of weakness in the U.S. economy, Fitch Ratings raised its global GDP forecast, citing better-than-expected data for the second quarter.
In a research note, the rating agency said it’s boosted its global growth forecast for the year to 2.4%, up 0.2 percentage points from its previous forecast, as Q2 data came in stronger than expected, which “partly reflected” efforts to front run higher U.S. tariffs.
Fitch said that the revised forecast, while slightly brighter, represents a “sizable slowdown” from the 2.9% growth recorded in 2024. It’s also below the long-term trend, as higher U.S. tariffs weigh on world growth. In 2026, growth is still seen edging down to 2.3%.
Since higher tariffs were first announced, there has been some greater clarity about just where those levels are settling, it noted.
“Greater clarity about U.S. tariff hikes does not alter the fact that they are huge and will reduce global growth,” said Brian Coulton, chief economist at Fitch, in a release — adding that, “Evidence of a slowdown in the U.S. is now appearing in the hard data; it’s no longer just in the sentiment surveys.”
For instance, the report noted that, while U.S. businesses have absorbed the initial impact of higher tariffs — reducing corporate profits — it expects that the higher costs will increasingly flow through to consumers, stoking higher inflation, and ultimately curbing economic growth.
“Higher inflation will dampen real wage growth and weigh on U.S. consumer spending, which has already slowed notably in 2025,” it said.
Additionally, the labour market is starting to show the effects of U.S. policy, it noted.
“Job growth has also decelerated markedly, partly reflecting the impact of the immigration squeeze on labour force growth,” it said.
As a result, Fitch said that it expects the U.S. GDP growth rate to “remain well below trend at 1.6% next year.”
In turn, the weaker U.S. job market should also push the U.S. Federal Reserve Board “to cut rates more quickly than we previously anticipated,” it said.
Indeed, it now expects 25 basis point rate cuts in both September and December, followed by three more rate cuts in 2026.
“With the [European Central Bank (ECB)] now looking unlikely to lower rates again, we see little prospect of a rebound in the dollar after the broad-based depreciation in [the first half],” Fitch added.