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President Donald Trump's unpredictable tariff policy and countermeasures from America's trading partners are likely to deal a severe blow to economies around the world, with US prosperity hit particularly hard, the International Monetary Fund has warned.
Global economic growth will slow to 2.8% this year, from 3.3% last year and well below the historical average, the IMF predicts in its World Economic Outlook. The expected slowdown in the United States is even steeper, with its economy likely to grow by just 1.8%, compared with a 2.8% expansion in 2024.
Both forecasts are more pessimistic than the fund predicted in January, before a flurry of tariff announcements from the US president pushed America's average import tariff to its highest level in a century.
"The rapid escalation of trade tensions and exceptionally high levels of policy uncertainty are expected to have a significant impact on global economic activity. And risks remain strongly tilted to the downside ," the Washington, DC-based institution said.
Trump's tariffs account for almost half of the sharp cut in the IMF's U.S. growth forecast for this year, Pierre-Olivier Gourinchas, chief economic adviser at the fund, wrote in a blog post, noting that policy uncertainty dampened U.S. demand even before the latest tariff announcements.
The latest World Economic Outlook was compiled under extraordinary circumstances, the IMF said. Trump’s announcement of sweeping tariffs on April 2 “forced us to abandon our forecasts – they were almost finalized at that point,” it wrote.
Underlining the importance of trade to the economic outlook, the IMF said that rising trade tensions combined with uncertainty about where trade policies are headed could further reduce growth, while depreciation from current tariff rates and new agreements that provide clarity and stability in trade policies could do the opposite.
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