Trump's tariffs and uncertainty dampen US, global economic prospects: IMF

The International Monetary Fund (IMF) reported Tuesday that the economic outlook for both the United States and the broader global economy has deteriorated significantly due to President Donald Trump's tariffs and the uncertainty they have triggered.

In its latest World Economic Outlook, the IMF revised its projection for global growth this year to 2.8%, down from the 3.3% it forecast in January.

The fund also expects global growth to reach just 3% in 2026, falling short of its earlier estimate of 3.3%.

The US economy is now forecast to grow only 1.8% in 2025, a sharp decline from the previous projection of 2.7%, and one percentage point lower than the estimated growth for 2024. While the IMF does not predict a recession in the United States, it has increased the likelihood of one from 25% to 37%.

These projections are broadly consistent with those of many private analysts, though some foresee even greater risks. JPMorgan economists, for instance, now assess the chance of a U.S. recession at 60%. The Federal Reserve also expects a slowdown, forecasting 1.7% growth this year.

"We are entering a new era," said Pierre-Olivier Gourinchas, the IMF's chief economist. "This global economic system that has operated for the last eighty years is being reset."

The IMF, a 191-member international financial institution, aims to foster global economic growth, maintain financial stability, and alleviate poverty.

Gourinchas noted that due to the elevated uncertainty linked to the import tariffs, the IMF took the unusual measure of developing multiple scenarios for future economic outcomes. Its projections were finalized on April 4, just after the Trump administration unveiled sweeping tariffs covering nearly 60 countries and imposing nearly universal 10% duties.

Although the tariffs were suspended on April 9 for 90 days, Gourinchas said this temporary pause did not substantially affect the IMF's forecasts, given the continued imposition of steep tariffs between the US and China.

The IMF warned that the ongoing uncertainty over future US trade policy is likely to put further pressure on both domestic and global economic performance. Businesses may delay investment or expansion decisions while awaiting clearer policy direction, potentially slowing growth further.

The impact of US tariffs is also expected to curb China's economic expansion. The IMF now anticipates China's economy will grow 4% in both 2025 and 2026—about half a percentage point lower than previously forecast.

While the US economy is likely to experience a "supply shock" akin to the one seen during the pandemic—when inflation surged in 2021 and 2022—Gourinchas said China will face weaker demand as American imports of Chinese goods decline.

Inflation in the US is projected to climb to around 3% by the end of the year, while China's inflation rate is expected to remain relatively stable, according to the IMF.

Europe is also set to experience slower growth, though the impact of tariffs is expected to be less severe there, partly because US duties on EU goods are lower than those on Chinese imports. Additionally, increased government spending in Germany is expected to help cushion some of the economic blow.

The IMF projects the eurozone's 27 member states will grow by 0.8% in 2025 and 1.2% in 2026—both figures trimmed by just 0.2 percentage points from January's estimates.

Meanwhile, Japan's economic outlook has also been revised downward. The IMF now expects the country to grow by 0.6% in both 2025 and 2026, representing reductions of 0.5 and 0.2 percentage points, respectively, from its earlier projections.