Washington:
On Tuesday, the International Monetary Fund cut forecasts for global growth this year, citing the impact of US President Donald Trump’s new tariff policy on the global economy.
The IMF forecast, which incorporates all tariff measures introduced this year, has risen 2.8% this year, looking at the global economy 0.5 percentage points lower than the previous World Economic Outlook (WEO) forecast in January.
Global growth will then reach 3.0% next year, down 0.3 percentage points from January.
“We are entering a new era as the global economic system that has been operating for the past 80 years has been reset,” IMF chief economist Pierre-Olivier Gourinchas told journalists ahead of the publication of the report.
“The risks to the global economy are rising and are steadily moving on to the downside,” he added, noting that the recent US tariff announcement has more than half the outlook for the World Trade Growth Fund this year.
WEO was featured as a global financial leader who gathered in Washington for the World Bank and IMF Spring Meeting. This is being held by two international financial institutions at their headquarters, throwing stones from the White House.
Given the nature of the stop-start against Trump’s tariff deployment, the IMF has introduced a cut-off date on April 4th. That is not included, the administration’s latest salvos, which hiked the new level of taxation on China to 145%.
If these policies are kept in mind, this could slow global growth significantly, the IMF said.
US growth in coolers
The IMF has reduced its US growth outlook to 1.8% this year. This is down 0.9 percentage points from January’s forecast.
The world’s largest economy is expected to cool to another 1.7% in 2026.
The slowdown was “due to increased policy uncertainty, trade tensions and soft demand momentum,” the IMF said in a WEO report.
Gourinchas points out that the impact of tariffs has a different impact on the country, and in the US it acts as a supply shock of “decreasing productivity and productivity and increasing prices.”
The fund has raised its US inflation forecast this year to 3.0% and 2.5% next year.
Tariffs are expected to cause a wider rise in global prices, slightly increasing the outlook for global consumer prices in 2025, and to rise to 3.6% in 2026.
Top trading partners are suffering
Top US trading partners Mexico, Canada and China are all predicted to be negatively affected by Trump administration tariffs.
The IMF expects China, the world’s second largest economy, to reduce its growth sluggishness to 4.0% this year from 5.0% in 2024, and it expects an increase in government spending to be incompetent with the impact of the new taxation.
The Mexican economy is currently forecast to sign 0.3% this year, a 1.7 percentage point cut from January, but Canada’s growth outlook has also been significantly reduced.
Japan, the world’s third largest economy, is expected to increase by just 0.6% this year and next year, and will be cut sharply from January.
The slowdown in Europe is deepening
The IMF expects tariffs to trigger growth in most European countries, with the Euro area’s growth outlook reduced to 0.8% in 2025 and 1.2% next year.
Currently, Germany is projected to not grow this year, but the outlook for France, the UK and Italy is being repeated.
The IMF has downgraded its Middle East outlook significantly, but it still expects economic activity to recover from 2024, as the disruption in the ease of oil production and transportation “and the effects of the ongoing conflict have been reduced.
In sub-Saharan Africa, growth is projected to drop to just 3.8% this year before it recovers next year.
Faced with pessimistic predictions, Gourinchas urged the country to avoid the negotiation table and terminate the deal.
“If the country relaxes its current trade policy stance and implements clear and predictable trade rules, the growth outlook could quickly improve,” he said.
(Except for the headline, this story has not been edited by NDTV staff and is published by Syndicate Feed.)
