IMF cuts global growth forecast over Trump tariffs

The International Monetary Fund has sharply reduced its global economic growth forecast, citing the disruptive impact of President Donald Trump’s new tariffs, AFP reported. 

In its latest World Economic Outlook released Tuesday, the IMF now expects the global economy to grow by 2.8% in 2025, down 0.5 percentage points from its January projection.

Growth in 2026 is forecast at 3.0%, also slightly lower than previous estimates. The IMF warned that escalating trade tensions, combined with policy uncertainty, are reshaping a global economic system that has existed for 80 years.

“We are entering a new era as the global economic system that has operated for the last 80 years is being reset,” IMF chief economist Pierre-Olivier Gourinchas said. 

He noted that trade growth has fallen sharply due to US tariff hikes, with the Fund’s projections only including measures announced up to April 4. More recent tariffs— like those raising US levies on Chinese goods to 145% — were not factored into this report.

A separate IMF report, the Global Financial Stability Report, warned that Trump's inconsistent tariff rollout is adding to risks in the global financial system. 

“Global financial stability risks have increased significantly,” the report said, attributing the rise to tighter financial conditions and heightened uncertainty.

The US growth forecast was cut to 1.8% for 2025, down from 2.7% in January, due to trade tensions, policy unpredictability, and weaker demand. The IMF also raised its inflation expectations for the US to 3.0% this year.

Major US trading partners are expected to feel the pinch. China’s projected growth is down to 4.0%, Mexico is now expected to contract by 0.3%, and Canada’s outlook was significantly reduced. In Europe, the euro area forecast was cut to 0.8%, with Germany projected to see no growth.

One exception is Spain, where growth was revised upward to 2.5%. Meanwhile, the Middle East and sub-Saharan Africa will also see slowdowns, though recovery is expected in 2026 as oil disruptions and conflicts ease.