New Delhi:
The International Monetary Fund (IMF) said Wednesday that it will slow down in the coming months, primarily due to the trade war, as US President Donald Trump has caused sudden tariffs on virtually all trading partners. The IMF has warned that the US is facing an increased risk of recession as it downgrades its outlook for all G7 countries, along with other major economies including China, India, Brazil and South Africa, in its latest global economic outlook.
The fund warned that if the country fails to “urgently resolve” trade tensions, it could further undermine its growth outlook. “If sustained, this rapid increase in tariffs and the resulting uncertainty will significantly slow global growth,” he said.
This came when the global finance chiefs flocked to Washington to sought to lower taxes with Trump’s team. According to White House press director Karoline Leavitt, 18 countries have provided proposals so far, and Trump’s trade negotiation team is scheduled to meet with 34 countries this week to discuss tariffs. The US President himself expressed optimism that trade contracts with China could “essentially” reduce tariffs and lift the market.
What the IMF said
The IMF’s forecast, which incorporates all tariff measures introduced this year, is 0.5 percentage points lower than previous World Economic Outlook (WEO) forecasts in January, looking at the global economy, which is up 2.8% this year. 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… If maintained, trade tensions and uncertainties will slow global growth,” IMF chief economist Pierre Olivier Gou Rinchas told reporters in Washington on Tuesday, with the recent announcement of US tariffs flaunting the fund for global trade growth this 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.
Given the nature of Trump’s stop-start 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.
In another report released Tuesday, the fund also warned that Trump’s stop-start tariff rollout has caused an increased risk of economic stability. “The risks of global financial stability are increasing significantly, driven by more severe global financial position and increased economic uncertainty,” the IMF stated in its latest Global Financial Stability Report.
Impact on US trading partners
All top US trading partners, including Mexico, Canada and China, are expected 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% point cut from January, and 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, marking a sharp cut from January.
The IMF expects tariffs to trigger growth in most European countries as the growth outlook for the Euro area will be reduced to 0.8% in 2025 and 1.2% next year.
The fund has also downgraded its Middle East outlook significantly, but it expects economic activity to recover from 2024 as the disruption in the ease of oil production and transport and the impact of ongoing conflicts decreases. ”
In sub-Saharan Africa, growth is projected to drop to just 3.8% this year before it recovers next year.
“In India, growth outlook is relatively stable at 6.2% in 2025, supported by private consumption, particularly in rural areas, but the IMF said in its report that this percentage is 0.3 percentage points lower than the WEO update in January 2025.
