IMF cuts global growth forecast, cites ‘significant slowdown' due to Trump tariffs
The International Monetary Fund (IMF) on Tuesday cut its growth forecasts for the US, China, and many other countries, blaming the sharp rise in US tariffs, now at 100-year highs, reported Reuters.It warned that further trade tensions could slow growth even more. The revised World Economic Outlook was prepared in just 10 days after President Trump announced sweeping tariffs on nearly all trading partners and proposed higher rates, which are currently on hold.advertisementThe IMF reduced its global growth forecast to 2.8% for 2025, down by 0.5 percentage point, while the 2024 forecast was cut by 0.3 points to 3%, down from the January projection of 3.3% for both years.
It has warned that the world economy is entering a difficult phase, as trade tensions and rising tariffs begin to take a toll. In a fresh update, the IMF said it expects slower growth in major countries, higher inflation, and growing uncertainty.This comes after US President Donald Trump announced sweeping tariffs on several countries. These tariffs, the highest seen in a century, are already hurting global trade and pushing prices up.INFLATION TO REMAIN HIGH, WHILE GROWTH TO SLOW DOWNThe IMF now expects global growth to be 2.8% in 2025, down by 0.5 percentage point from its earlier estimate. For 2024, it cut its forecast by 0.3 points to 3%. Inflation is also expected to come down more slowly than hoped, reaching 4.3% in 2025 and 3.6% in 2026.The IMF said these forecasts were based on developments up to April 4, and the situation remains highly uncertain.advertisement"We are entering a new era as the global economic system that has operated for the last 80 years is being reset," quoted IMF's chief economist Pierre-Olivier Gourinchas, according to Reuters.TARIFFS ADDING TO UNCERTAINTY AND VOLATILITYGourinchas said the rapid rise in tariffs and unclear policies are creating serious challenges for the global economy. If trade tensions continue to grow, it could lead to more financial market volatility, tighter financial conditions, and even lower global growth, he added.While demand for the US dollar has weakened, currency markets have remained stable so far, Gourinchas mentioned. However, he warned that growth in the coming years looks weak. The IMF sees global growth averaging just 3.2% over the next five years, well below the 3.7% average seen from 2000 to 2019.The international agency has sharply reduced its forecast for global trade growth, cutting it by 1.5 percentage points to just 1.7% in 2025, nearly half the rate seen in 2024. This reflects growing fragmentation in global supply chains.The IMF anticipates the US economy to grow 1.8% in 2025, down from 2.8% in 2024, and 1.7% in 2026. It blamed policy uncertainty and tariffs for this slowdown. Inflation in the US is now forecast to hit 3% in 2025, a full percentage point higher than earlier estimates.Although the IMF does not see a recession in the US, it said the risk of one has risen from 25% to 37%. Gourinchas also warned that the Federal Reserve must stay focused on keeping inflation expectations under control.CANADA, MEXICO AND EUROPE IMPACTEDUS trade partners Canada and Mexico have also seen their growth forecasts lowered. Canada is now expected to grow 1.4% in 2025 and 1.6% in 2026, while Mexico is likely to shrink by 0.3% in 2025 before recovering to 1.4% growth in 2026.In Europe, growth in the Euro region is expected to slow to 0.8% in 2025 and 1.2% in 2026. Germany's economy is forecast to flatline in 2025, while Spain is expected to grow faster than the rest of the region.The UK will also feel the impact of tariffs, with growth forecast at 1.1% in 2025 and 1.4% in 2026, lower than earlier estimates. The IMF pointed to higher government borrowing costs and weak private consumption as key reasons.ASIA FEELS THE PRESSUREIn Japan, trade tensions and tariffs are expected to reduce economic activity by 0.5 percentage point in 2025, with growth expected at just 0.6%. China, heavily reliant on exports, is also hit hard. Its growth is now forecast at 4% in both 2025 and 2026, lower than previous forecasts.Even though tariffs are weighing on China, the IMF noted that the country's government is boosting spending to cushion the blow.Must Watch
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