IMF cuts global growth forecast, cites Trump's tariffs
The International Monetary Fund on Tuesday cut its global growth forecasts citing the impact of the tariffs imposed by the United States earlier this month.
The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity, it said in a report on Tuesday.
The United Nations' financial agency slashed its global growth forecast by 0.5 percentage point to 2.8% for 2025. It cut its January forecast for 2026 by 0.3 percentage point to 3%.
The International Monetary Fund said that inflation was expected to fall slower than expected in January because of the tariffs. The inflation rate would be 4.3% in 2025 and 3.6% in 2026.
It said that India would grow at 6.2% in the financial year 2025-'26. This is 0.3 percentage points lower than what the agency had forecast in January. It forecast India to grow at 6.3% in the next financial year, down from 6.5%.
Washington had announced so-called reciprocal tariffs on dozens of countries, including a 26% 'discounted' levy on India, on April 2.
Trump had repeatedly said he intended to impose a reciprocal tax on India, among others, citing high tariffs the countries impose on foreign goods. He had already imposed tariffs on a range of products from Canada, Mexico and China.
On April 9, Trump reduced the duties on imports from countries other than China to 10% for 90 days, to provide time for trade negotiations. On Tuesday, he also hinted at reducing tariffs on Chinese goods.
The tariffs have led to concerns of a broader trade war that could disrupt the global economy and trigger recession.
The agency said that its report was a 'reference forecast' based on developments until April 4.
Pierre-Olivier Gourinchas, the director of the research Department at the agency, said that the world was 'entering a new era' as the economic system that has operated for the last 80 years was being reset.
'Since late January, many tariff announcements have been made, culminating on April 2, with near universal levies from the United States and counterresponses from some trading partners,' Gourinchas said. 'The US effective tariff rate has surged past levels reached more than 100 years ago, while tariff rates on the US have also increased.'
While global growth remains well above recession levels, all regions have been hurt this year and next, Gourinchas added.
The Indian government has said that it is in talks with Washington to finalise a bilateral trade agreement between September and November.
China tariffs will come down 'substantially': Trump
On Tuesday, Trump said that high tariffs on Chinese imports will 'come down substantially, but it won't be zero', CNN reported.
On April 10, the US government hiked levies on Chinese imports to 145%, marking a sharp escalation in trade tensions between the world's two largest economies. In response, Beijing increased tariffs on all United States goods from 84% to 125% from April 12.
During a question and answer session with journalists at the White House on Tuesday, the US president acknowledged: '145% is very high and it won't be that high…It won't be anywhere near that high.'
The statement was in response to a question about US Treasury Secretary Scott Bessent's statement earlier on Tuesday that high tariffs between the US and China had effectively embargoed trade between the two countries.
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