Latest news with #Gourinchas
Yahoo
28-04-2025
- Business
- Yahoo
IMF cuts growth forecasts for most countries in wake of century-high US tariffs
By Andrea Shalal WASHINGTON (Reuters) - The International Monetary Fund on Tuesday slashed its growth forecasts for the United States, China and most countries, citing the impact of U.S. tariffs now at 100-year highs and warning that rising trade tensions would further slow growth. The IMF released an update to its World Economic Outlook compiled in just 10 days after U.S. President Donald Trump announced universal tariffs on nearly all trading partners and higher rates - currently suspended - on many countries. It cut its forecast for global growth by 0.5 percentage point to 2.8% for 2025, and by 0.3 percentage point to 3% from its January forecast that growth would reach 3.3% in both years. It said inflation was expected to decline more slowly than expected in January, given the impact of tariffs, reaching 4.3% in 2025 and 3.6% in 2026, with "notable" upward revisions for the U.S. and other advanced economies. The IMF called the report a "reference forecast" based on developments through April 4, citing the extreme complexity and fluidity of the current moment. "We are entering a new era as the global economic system that has operated for the last 80 years is being reset," IMF chief economist Pierre-Olivier Gourinchas told reporters. The IMF said the swift escalation of trade tensions and "extremely high levels" of uncertainty about future policies would have a significant impact on global economic activity. "It's quite significant and it's hitting all the regions of the world. We're seeing lower growth in the U.S., lower growth in the euro area, lower growth in China, lower growth in other parts of the world," Gourinchas told Reuters in an interview. "If we get an escalation of trade tensions between the U.S. and other countries, that will fuel additional uncertainty, that will create additional financial market volatility, that will tighten financial conditions," he said, adding the bundled effect would further lower global growth prospects. Weaker growth prospects had already lowered demand for the dollar, but the adjustment in currency markets and portfolio rebalancing seen to date had been orderly, he said. "We are not seeing a stampede or a run to the exits," Gourinchas said. "We're not concerned at this stage about the resilience of the international monetary system. It would take something much bigger than this." However, medium-term growth prospects remained mediocre, with the five-year forecast stuck at 3.2%, below the historical average of 3.7% from 2000-2019, with no relief in sight absent significant structural reforms. The IMF slashed its forecast for growth in global trade by 1.5 percentage point to 1.7%, half the growth seen in 2024, reflecting the accelerating fragmentation of the global economy. Sharply increased tariffs between the United States and China will result in much lower bilateral trade between the world's two largest economies, Gourinchas said, adding, "That is weighing down on global trade growth." Trade would continue, but it would cost more and it would be less efficient, he said, citing confusion and uncertainty about where to invest and where to source products and components. "Restoring predictability, clarity to the trading system in whatever form is absolutely critical," he told Reuters. US GROWTH DOWN, INFLATION UP The IMF downgraded its forecast for U.S. growth by 0.9 percentage point to 1.8% in 2025 - a full percentage point down from 2.8% growth in 2024 - and by 0.4 percentage point to 1.7% in 2026, citing policy uncertainty and trade tensions. Gourinchas told reporters the IMF did not foresee a recession in the U.S., but the odds of a downturn had increased from about 25% to 37%. He said the IMF was now projecting U.S. headline inflation to reach 3% in 2025, one percentage point higher than it forecast in January, due to tariffs and underlying strength in services. That meant the Federal Reserve will have to be very vigilant in keeping inflation expectations anchored, Gourinchas said, noting that many Americans were still scarred by a spike in inflation during the COVID pandemic. Asked about the impact of any moves by the White House to remove Fed Chair Jerome Powell, Gourinchas said it was "absolutely critical" that central banks were able to remain independent to maintain their credibility in addressing inflation. U.S. stocks suffered steep losses on Monday as the U.S. president ramped up his attacks on Powell, fueling concerns about the central bank's independence. Stocks opened higher on Tuesday. U.S. neighbors Canada and Mexico, both targeted by a range of Trump's tariffs, also saw their growth forecasts cut. The IMF forecast Canada's economy would grow by 1.4% in 2025 and 1.6% in 2026, instead of 2% growth projected for both years in January. It predicted Mexico would be hard hit by tariffs, with its growth dipping to a negative 0.3% in 2025, a sharp 1.7 percentage point drop from the January forecast, before recovering to 1.4% growth in 2026. LOWER GROWTH IN EUROPE, ASIA The IMF forecast growth in the Euro Area would slow to 0.8% in 2025 and 1.2% in 2026, with both forecasts about 0.2 percentage points down from January. It said Spain was an outlier, with a 2.5% growth forecast for 2025, a 0.2 percentage point upward revision, reflecting strong data. Offsetting forces included stronger consumption due to rising wages and a projected fiscal easing in Germany after major changes to its "debt brake." The IMF cut its growth forecast for Germany by 0.3 percentage point to 0.0% in 2025, and by 0.2 percentage point to 0.9% in 2026. Growth in Britain would hit 1.1% in 2025, 0.5 percentage point below the January forecast, edging higher to 1.4% in 2026, reflecting the impact of recent tariff announcements, higher gilt yields and weaker private consumption. Trade tensions and tariffs were expected to shave 0.5 percentage point off Japan's economic activity in 2025, compared to the January forecast, with growth projected at 0.6%. China's growth forecast was cut to 4% for 2025 and 2026, reflecting respective downward revisions of 0.6 percentage point and 0.5 percentage point from the January forecast. Gourinchas said the impact of the tariffs on China - hugely dependent on exports - was about 1.3 percentage point in 2025, but that was offset by stronger fiscal measures. Sign in to access your portfolio
Scroll.in
23-04-2025
- Business
- Scroll.in
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.
1News
23-04-2025
- Business
- 1News
Global economic outlook deteriorates amid Trump trade war
The US and global economies will likely slow significantly in the wake of Donald Trump's tariffs and the uncertainty they have created, the International Monetary Fund says. The IMF said that the global economy will grow just 2.8% this year, down from its forecast in January of 3.3%, according to its latest World Economic Outlook. And in 2026, global growth will be 3%, the fund predicts, also below its previous 3.3% estimate. And the Fund sees the world's two largest economies, China and the United States, weakening: US economic growth will come in at just 1.8% this year, down sharply from its previous forecast of 2.7% and a full percentage point below its 2024 expansion. The IMF doesn't expect a US recession, though it has raised its odds of one this year from 25% to about 40%. China is now projected to expand 4% this year and next, down roughly half a point from its previous forecasts. The group is seeking new markets as global turmoil over tariffs upset traditional ways of doing business. (Source: 1News) 'We are entering a new era,' Pierre-Olivier Gourinchas, chief economist at the IMF, said. 'This global economic system that has operated for the last eighty years is being reset.' The forecasts underscore the widespread impact of both the tariffs and the uncertainty they have created. Every country in the world is affected, the IMF said, by hikes in US import taxes that have now lifted average US duties to about 25%, the highest in a century. The forecasts are largely in line with many private-sector economists' expectations, though some do fear a recession is increasingly likely. Economists at JPMorgan say the chances of a US recession are now 60%. The Federal Reserve has also forecast that growth will weaken this year, to 1.7%. The IMF is a 191-nation lending organisation that works to promote economic growth and financial stability and to reduce global poverty. It comes as the White House clarified its China tariff is 145%, not 125% as previously thought. (Source: 1News) Gourinchas said that the heightened uncertainty around the import taxes led the IMF to take the unusual step of preparing several different scenarios for future growth. Its forecasts were finalised April 4, after the Trump administration announced sweeping tariffs on nearly 60 countries along with nearly-universal 10% duties. Those duties were paused April 9 for 90 days. Gourinchas said the pause didn't substantially change the IMF's forecasts because the US and China have imposed such steep tariffs on each other since then. The Trump administration has slapped duties on cars, steel, and aluminium, as well as 25% import taxes on most goods from Canada and Mexico. The White House has also imposed 10% tariffs on nearly all imports, and a huge 145% duty on goods from China, though smartphones and computers have been exempted. China has retaliated with 125% duties on US goods. The US president's tariff regime has been paused - except for imports from China - after upheaval in the markets. (Source: 1News) The uncertainty surrounding the Trump administration's next moves will also likely weigh heavily on the US and global economies, the IMF said. Most traded goods are parts that feed into finished products, and the tariffs could disrupt supply chains, similar to what occurred during the pandemic, Gourinchas warned in a blog post. 'Companies facing uncertain market access will likely pause in the near term, reduce investment and cut spending,' he wrote. The US tariffs are also expected to hit less-developed nations, with Mexico's economy now expected to shrink this year by 0.3%, down from a previous projection of 1.4% growth. South Africa is forecast to grow just 1% this year, down from a 1.5% projection in January. While the US economy will likely suffer a supply shock, Gourinchas said, China is expected to experience reduced demand as US purchases of its exports fall. Inflation will likely worsen in the United States, rising to about 3% by the end of this year, while it will be little changed in China, the IMF forecast. In his blog post, Gourinchas acknowledged that there is an 'acute perception that globalisation unfairly displaced many domestic manufacturing jobs' and added that 'there is some merit to these grievances.' But he added that the 'deeper force behind this decline is technological progress and automation, not globalisation.' Gourinchas noted that both Germany, which has a goods trade surplus, and the US, which has a deficit, have seen factory output remain relatively level in recent decades even as automation has caused manufacturing employment to decline. The IMF expects the tariffs to take a big chunk out of China's economy, but it also forecasts that additional spending by the Chinese government will offset much of the hit. The European Union is forecast to grow more slowly, but the hit from tariffs is not as large, in part because it is facing lower US duties than China. In addition, some of the hit from tariffs will be offset by stronger government spending by Germany. The economies of the 27 countries that use the euro are forecast to expand 0.8% this year and 1.2% next year, down just 0.2% in both years from the IMF's January forecast. Japan's growth forecast has been marked down to 0.6% this year and next, 0.5% and 0.2% lower than in January, respectively. In a separate report Tuesday, the IMF warned that 'global financial stability risks have increased significantly,'' along with the deteriorating economic outlook. The fund noted that some stock and bond prices remained high despite the recent market rout triggered by Trump's tariffs – which means they are vulnerable to further drops. The IMF also cautioned that 'some financial institutions could come under strain in volatile markets,'' pointing in particular to heavily indebted hedge funds and asset management companies and the risk that they will be forced to raise cash by selling investments into an already-fragile market.
Associated Press
23-04-2025
- Business
- Associated Press
US and global economic outlook deteriorates in Trump trade war, IMF says
WASHINGTON (AP) — The U.S. and global economies will likely slow significantly in the wake of President Donald Trump's tariffs and the uncertainty they have created, the International Monetary Fund said Tuesday. The IMF said that the global economy will grow just 2.8% this year, down from its forecast in January of 3.3%, according to its latest World Economic Outlook. And in 2026, global growth will be 3%, the fund predicts, also below its previous 3.3% estimate. And the Fund sees the world's two largest economies, China and the United States, weakening: U.S. economic growth will come in at just 1.8% this year, down sharply from its previous forecast of 2.7% and a full percentage point below its 2024 expansion. The IMF doesn't expect a U.S. recession, though it has raised its odds of one this year from 25% to about 40%. China is now projected to expand 4% this year and next, down roughly half a point from its previous forecasts. 'We are entering a new era,' Pierre-Olivier Gourinchas, chief economist at the IMF, said. 'This global economic system that has operated for the last eighty years is being reset.' The forecasts underscore the widespread impact of both the tariffs and the uncertainty they have created. Every country in the world is affected, the IMF said, by hikes in US import taxes that have now lifted average U.S. duties to about 25%, the highest in a century. The forecasts are largely in line with many private-sector economists' expectations, though some do fear a recession is increasingly likely. Economists at JPMorgan say the chances of a U.S. recession are now 60%. The Federal Reserve has also forecast that growth will weaken this year, to 1.7%. The IMF is a 191-nation lending organization that works to promote economic growth and financial stability and to reduce global poverty. Gourinchas said that the heightened uncertainty around the import taxes led the IMF to take the unusual step of preparing several different scenarios for future growth. Its forecasts were finalized April 4, after the Trump administration announced sweeping tariffs on nearly 60 countries along with nearly-universal 10% duties. Those duties were paused April 9 for 90 days. Gourinchas said the pause didn't substantially change the IMF's forecasts because the U.S. and China have imposed such steep tariffs on each other since then. The Trump administration has slapped duties on cars, steel, and aluminum, as well as 25% import taxes on most goods from Canada and Mexico. The White House has also imposed 10% tariffs on nearly all imports, and a huge 145% duty on goods from China, though smartphone and computers have been exempted. China has retaliated with 125% duties on US goods. The uncertainty surrounding the Trump administration's next moves will also likely weigh heavily on the U.S. and global economies, the IMF said. Most traded goods are parts that feed into finished products, and the tariffs could disrupt supply chains, similar to what occurred during the pandemic, Gourinchas warned in a blog post. 'Companies facing uncertain market access will likely pause in the near term, reduce investment and cut spending,' he wrote. The U.S. tariffs are also expected to hit less-developed nations, with Mexico's economy now expected to shrink this year by 0.3%, down from a previous projection of 1.4% growth. South Africa is forecast to grow just 1% this year, down from a 1.5% projection in January. While the U.S. economy will likely suffer a supply shock, Gourinchas said, China is expected to experience reduced demand as U.S. purchases of its exports fall. Inflation will likely worsen in the United States, rising to about 3% by the end of this year, while it will be little changed in China, the IMF forecast. In his blog post, Gourinchas acknowleged that there is an 'acute perception that globalization unfairly displaced many domestic manufacturing jobs' and added that 'there is some merit to these grievances.' But he added that the 'deeper force behind this decline is technological progress and automation, not globalization.' Gourinchas noted that both Germany, which has a goods trade surplus, and the U.S., which has a deficit, have seen factory output remain relatively level in recent decades even as automation has caused manufacturing employment to decline. The IMF expects the tariffs to take a big chunk out of China's economy, but it also forecasts that additional spending by the Chinese government will offset much of the hit. The European Union is forecast to grow more slowly, but the hit from tariffs is not as large, in part because it is facing lower U.S. duties than China. In addition, some of the hit from tariffs will be offset by stronger government spending by Germany. The economies of the 27 countries that use the euro are forecast to expand 0.8% this year and 1.2% next year, down just 0.2% in both years from the IMF's January forecast. Japan's growth forecast has been marked down to 0.6% this year and next, 0.5% and 0.2% lower than in January, respectively. In a separate report Tuesday, the IMF warned that 'global financial stability risks have increased significantly,'' along with the deteriorating economic outlook. The fund noted that some stock and bond prices remained high despite the recent market rout triggered by Trump's tariffs – which means they are vulnerable to further drops. The IMF also cautioned that 'some financial institutions could come under strain in volatile markets,'' pointing in particular to heavily indebted hedge funds and asset management companies and the risk that they will be forced to raise cash by selling investments into an already-fragile market. _____ AP Economics Writer Paul Wiseman contributed to this report.
Business Recorder
23-04-2025
- Business
- Business Recorder
World could boost growth by reducing trade doubt: IMF
WASHINGTON: Policymakers should find a way to reduce the uncertainty over trade policy kicked up by Donald Trump's tariff plans in order to boost global growth, the International Monetary Fund's chief economist said in an interview. 'The uncertainty in trade policy, and in policy generally right now, is a big drag on global activity,' Pierre-Olivier Gourinchas told AFP ahead of Tuesday's publication of the IMF World Economic Outlook report. 'And the sooner we can lift it, the better off everyone will be,' he said, adding: 'Bringing back stability, clarity, predictability to the trading system is the first order of business.' In the updated outlook published as global financial leaders gather for the World Bank and IMF Spring Meetings in Washington, the Fund sees global growth cooling to 2.8 percent this year, a 0.5 percentage-point cut from its last forecast in January. Global growth is then forecast to hit 3.0 percent in 2026, a 0.3 percentage-point markdown from January. The IMF now expects 3.0 percent inflation this year, effectively stalling progress towards the US Federal Reserve's two percent long-term inflation target. Higher inflation 'will, of course, have implications for what the central bank will need to be doing,' Gourinchas said. If inflation developments prove to be persistent, the Fed 'may have to delay easing monetary policy, or they may even have to start looking to increase and tighten the monetary policy rate,' he added. The impact of tariffs is also 'quite significant' for China, Gourinchas said, adding that the IMF expects the levies to constrain growth by around 1.3 percentage points, counteracted somewhat by the fiscal measures Beijing introduced to prop up the economy last year. As a result, the IMF has trimmed China's growth forecast by 0.6 percentage points, and now sees growth of just 4.0 percent this year, down sharply from the 5.0 percent growth seen in 2024.
