IMF Slashes Global Growth Forecast Citing Trump Tariffs

IMF Slashes Global Growth Forecast Citing Trump Tariffs

The IMF anticipates that inflation will remain high, reaching 4.3% in 2025.

RMN News Report

The International Monetary Fund (IMF) has sharply reduced its global economic growth projections for both 2024 and 2025, primarily blaming the significant increase in US tariffs under President Trump.

The IMF announced that its global growth forecast for 2025 has been cut to 2.8%, a 0.5 percentage point decrease from its January projection of 3.3%. The forecast for 2024 has also been lowered by 0.3 percentage points to 3%, down from the initial 3.3% estimate.

The IMF’s revised World Economic Outlook, prepared rapidly following President Trump’s announcement of sweeping tariffs, highlights that these tariffs are now at 100-year highs. The agency warns that further trade tensions could lead to an even more significant slowdown in global growth.

Several major economies are expected to experience slower growth due to these developments. The US economy is now projected to grow by 1.8% in 2025, down from 2.8% in 2024. Policy uncertainty and tariffs are cited as the reasons for this slowdown. The risk of a US recession has also increased.

Other key trading partners are also affected. Canada’s growth forecast for 2025 has been lowered to 1.4%, while Mexico is expected to see a 0.3% contraction in 2025. In Europe, the Euro region’s growth is predicted to slow to 0.8% in 2025. The UK is also expected to feel the impact with a growth forecast of 1.1% in 2025.

China, a major exporting nation, is also significantly impacted, with its growth forecast lowered to 4% for both 2025 and 2026. Japan’s economic activity is also expected to be reduced by 0.5 percentage points in 2025 due to trade tensions and tariffs.

The IMF anticipates that inflation will remain high, reaching 4.3% in 2025. The rapid increase in tariffs and unclear policies are creating serious challenges, according to IMF’s chief economist Pierre-Olivier Gourinchas, who stated, “We are entering a new era as the global economic system that has operated for the last 80 years is being reset”. He also warned that continued trade tensions could lead to more financial market volatility and tighter financial conditions.

The IMF has also 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’s forecasts are based on developments up to April 4, and the situation remains highly uncertain.