The IMF cuts the estimated growth for most countries after the highest US tariff
International monetary funds on Tuesday cut their estimated growth for the United States, China and most countries, citing the current US tariff impact at the highest 100 years and warned that increasing trade tensions will further slow down growth.
The IMF released a reform for the world economic prospects that were compiled only in 10 days after US President Donald Trump announced universal tariffs in almost all higher trading partners and tariffs – currently suspended – in many countries.
This intersects estimates for global growth of 0.5 points percentage to 2.8% for 2025, and 0.3 points percentage to 3% from January estimates that growth will reach 3.3% in the two years.
It is said that inflation is expected to decrease slower than expected in January, given the impact of the tariff, reaching 4.3% in 2025 and 3.6% in 2026, with a “famous” upper revision for the US and other advanced economies.
The IMF called the report as a “estimated reference” based on development until April 4, quoting the current complexity and fluidity of the moment.
“We have entered a new era as a global economic system that has been operating for the past 80 years being re-regulated,” IMF Pierre-Olivier Gourinchas Economist Chief told reporters.
The IMF said the escalation of rapid trade tensions and “very high levels” of uncertainty about future policies would have a significant impact on global economic activities.
“This is quite significant and hit all regions in the world. We see lower growth in the US, lower growth in the Euro region, lower growth in China, lower growth in other parts of the world,” Goourinchas told Reuters in an interview.
“If we get the escalation of trade tensions between the US and other countries, which will trigger additional uncertainty, which will create additional financial market volatility, which will tighten financial conditions,” he said, adding effects on the bundle will further reduce the prospect of global growth.
Weaker growth prospects have reduced demand for dollars, but adjustments in the currency market and re -balance the portfolio that have been seen so far has been orderly, he said.
“We did not see the invasion or ran to the exit,” Gourinchas said. “We are not worried at this stage about the resilience of the international monetary system. It takes something far greater than this.”
However, the prospect of medium-term growth remains mediocre, with an estimated five years trapped at 3.2%, below the historical average of 3.7% from 2000-2019, without assistance there is no significant structural reform.
The IMF cut its estimate for the growth of global trade by 1.5 points percentage to 1.7%, half of the growth seen in 2024, reflecting the acceleration of global economic fragmentation.
The sharp tariff between the United States and China will produce much lower bilateral trade between the two largest economies in the world, Gourinchas said, “It burdened the growth of global trade.”
Trade will continue, but it will be more expensive and it will be less efficient, he said, quoting confusion and uncertainty about where to invest and where to find products and components. “Restoring predictability, clarity in the trading system in any form is very important,” he told Reuters.
US growth drops, inflation rises
The IMF reduced its estimate for US growth by 0.9 points percentage to 1.8% in 2025 – full percentage points of 2.8% growth in 2024 – and 0.4 points percentage to 1.7% in 2026, quoting policy uncertainty and trading tension.
Gourinche told reporters that the IMF did not see a recession in the US, but the possibility of a decline had increased from around 25% to 37%. He said the IMF now projects the main US inflation to 3% in 2025, one point percentage is higher than estimates in January, due to the underlying tariffs and strengths in the service.
That means the Federal Reserve must be very vigilant in maintaining inflation expectations anchored, said Gourinchas, noting that many Americans are still injured by the surge in inflation during Pandemi Covid.
Asked about the impact of each movement by the White House to remove Fed Chair Jerome Powell, Gourinche said “very critical” that the central bank can remain independent to maintain their credibility in overcoming inflation.
US shares suffered a sharp loss on Monday when the US president increased his attack on Powell, triggered concerns about the independence of the central bank. Stocks are opened higher on Tuesday.
The neighboring US Canada and Mexico, both of which are targeted by various Trump rates, also look at their estimated growth. The IMF Canadian Economic estimate will grow by 1.4% in 2025 and 1.6% in 2026, instead of the 2% growth that is projected for the second year in January.
This estimates that Mexico will be hard to be beaten by tariffs, with its growth down to 0.3% negative in 2025, a decrease in points of 1.7 sharp percentage from January estimates, before recovering to a growth of 1.4% in 2026.
Lower growth in Europe, Asia
IMF estimated growth in the Euro region will slow down to 0.8% in 2025 and 1.2% in 2026, with both estimates of around 0.2 points the percentage fell from January. It is said that Spain is an outlier, with an estimated growth of 2.5% for 2025, a revision of 0.2 points and above, reflects strong data.
The strength of the balancing is a stronger consumption due to an increase in wages and fiscal easing projected in Germany after a major change in “debt brakes”. The IMF cut its growth estimated for Germany by 0.3 points percentage to 0.0% in 2025, and 0.2 points percentage to 0.9% in 2026.
Growth in the UK will reach 1.1% in 2025, 0.5 points the percentage below January estimates, up higher to 1.4% in 2026, reflecting the impact of the announcement of the new tariffs, the results of the higher GILT and weaker private consumption.
Tensions of trade and tariffs are expected to shave 0.5 percentage of points from Japan’s economic activity in 2025, compared to January estimates, with growth projected at 0.6%.
China’s growth forecasts are deducted to 4% for 2025 and 2026, reflecting each revision down 0.6 percentage points and 0.5 percentage points from January estimates.
Gourinche said the impact of the tariff on China – was very dependent on exports – around 1.3 points percentage in 2025, but it was balanced by stronger fiscal steps.
Source: Reuters
