IMF: US Tariffs Shake Global Economy, Outlook Downbeat

Global growth has been revised downward and inflation projections nudged upward in the latest World Economic Outlook released on Tuesday by the International Monetary Fund (IMF). The fund now expects global GDP to grow by 2.8% this year, a 0.5 percentage point cut from its January estimate.

The IMF attributed the downward revision largely to trade tensions initiated by U.S. President Donald Trump. It warned that tariffs represent a “negative supply shock” that is fueling uncertainty and triggering a “significant slowdown” in global activity.

“In the medium term, we can expect tariffs to decrease competition and innovation, and increase rent-seeking, further weighing on the outlook,” the report noted.

The sharpest downgrade among advanced economies was reserved for the United States. The IMF now expects U.S. growth to reach just 1.8% in 2025, down from 2.7% in January, citing the growing uncertainty caused by escalating trade tariffs.

In the eurozone, where the impact of tariffs has been relatively milder, growth is now forecast at 0.8%, a modest 0.2 percentage point downgrade. Nonetheless, stronger fiscal stimulus in both Europe and China is expected to provide some support through this year and into next.

However, the outlook for emerging market economies remains clouded by volatility in trade policy. The IMF has revised its growth forecast for this group downward by 0.5 percentage points, to 3.7%.

In Greece, growth is projected at 2%, double the eurozone average, though slightly down from the 2.1% estimate in January.

China’s growth forecast has also been trimmed, now estimated at 4%, a 0.6 percentage point drop. Inflation projections for the country were also revised down by 0.8 percentage points.

IMF Chief Economist Pierre-Olivier Gourinchas emphasized the broader structural implications of the ongoing trade tensions.

“The global economic system under which most countries have operated for the last 80 years is being reset, ushering the world into a new era. Existing rules are challenged while new ones are yet to emerge,” Gourinchas said.

He added that since late January, a flurry of U.S. tariff announcements, initially targeting Canada, China, Mexico, and key sectors, culminated in near-universal levies by April 2. The U.S. effective tariff rate has now surged past levels seen during the Great Depression, with retaliatory tariffs from key trading partners compounding the global trade shock.

Source: Tovima.com