IMF Downgrades Global Economic Growth Forecasts Amid Rising US Tariffs

The International Monetary Fund (IMF) has significantly downgraded its global economic growth forecasts for 2025 and 2026, citing the adverse effects of escalating U.S. tariffs under President Donald Trump's administration. In its latest World Economic Outlook, the IMF projects global growth at 2.8% for 2025 and 3% for 2026, reductions of 0.5 and 0.3 percentage points, respectively, from previous estimates.

The IMF attributes these downward revisions primarily to the unprecedented levels of U.S. import tariffs, some reaching as high as 145%, which have disrupted global trade and heightened economic uncertainty. The report warns that these escalating trade tensions could further dampen economic activity, increase financial market volatility, and tighten financial conditions.

The U.S. economy is now expected to grow by only 1.8% in 2025, a full percentage point lower than the previous year, positioning it as a major drag on global growth prospects. Inflation in the U.S. is projected to rise to 3% in 2025, up one percentage point due to increased import costs stemming from the tariffs.

China's growth forecast has also been revised down to 4% for 2025 and 2026, reflecting its export dependence and the impact of the trade war. The Euro Area's growth is expected to slow, particularly in Germany, though Spain remains a positive outlier.

Under President Trump's administration, the U.S. has imposed steep import levies, some reaching as high as 145%, affecting trade globally. Notably, tariffs have triggered a trade standoff with China, which has retaliated with 125% tariffs, fueling concerns about a prolonged economic freeze between the two largest economies.

IMF Chief Economist Pierre-Olivier Gourinchas stated, "We are entering a new era as the global economic system that has operated for the last 80 years is being reset."

The IMF emphasizes the uncertainty and complexity stemming from escalating trade tensions and notes that without the so-called "Liberation Day" tariffs, global growth would be marginally higher at 3.2%.

The IMF's latest report underscores the significant impact of escalating U.S. tariffs on the global economy, highlighting the need for policymakers to consider the broader economic implications of protectionist measures. The ongoing trade tensions pose risks not only to economic growth but also to financial stability and societal well-being.