IMF Slashes Global Growth Forecast Amid Tariff Turmoil

The International Monetary Fund (IMF) has slashed its global growth forecast for 2025, citing rising risks from U.S. President Donald Trump's escalating tariff policies. The Fund now projects the global economy will expand by just 2.8% this year — down 0.5 percentage points from its previous forecast in January.

Growth is expected to rebound modestly to 3.0% in 2026, still 0.3 points below earlier estimates. The IMF warned that if current trade tensions persist, global economic prospects could deteriorate further.

“We are entering a new era as the global economic system is being reset,” IMF chief economist Pierre-Olivier Gourinchas said in Washington during the Spring Meetings with the World Bank. “Sustained trade tensions and uncertainty are weighing on global growth.”

The IMF’s World Economic Outlook (WEO) includes data up to April 4, meaning the latest round of U.S. tariffs—raising duties on Chinese goods to as much as 145%—are not fully reflected. If maintained, these policies could further erode growth and fuel global inflation, the report warned.

A separate Global Financial Stability Report, also released Tuesday, flagged increased risks to financial markets due to “tightening global conditions and economic uncertainty” fueled by Washington’s tariff strategy.

U.S. Growth Outlook Dimmed

The IMF downgraded U.S. growth to 1.8% for 2025, nearly a full percentage point below January’s forecast, with further cooling expected into 2026. The slowdown is driven by policy uncertainty, slowing demand, and tariff impacts.

The Fund also raised its U.S. inflation forecast to 3.0% this year, reflecting rising consumer prices amid higher import costs.

Major Economies Hit

Tariff-related pressures are rippling across top U.S. trading partners:

    China: Growth now expected at 4.0% in 2025, down from 5.0% in 2024, despite stimulus efforts.

    Mexico: Economy forecast to contract by 0.3%, a sharp 1.7-point drop from earlier projections.

    Canada: Growth outlook also cut significantly.

    Japan: Projected to grow just 0.6% this year and next.

Europe's Outlook Weakens

The euro area is now expected to grow by only 0.8% in 2025 and 1.2% the following year. Germany is forecast to see no growth, while France, the UK, and Italy face downward revisions. Spain was the only major European economy to receive an upgrade, with projected growth of 2.5%.

Emerging Markets and Other Regions

In the Middle East, growth has been sharply downgraded due to conflict and supply disruptions, though a recovery is expected from 2024. Sub-Saharan Africa’s economy is projected to grow 3.8% this year, with a modest rebound next year.