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Tariffs are posing major headwinds for the US and global economies, leading the International Monetary Fund to slash its 2025 growth forecast.
President Donald Trump’s April 2 rollout of “reciprocal” tariffs has not only shaken stocks, but they have also set off countermeasures from other trading partners.
“This on its own is a major negative shock to growth,” the IMF said in the executive summary of its April 2025 World Economic Outlook.
This new outlook includes a “reference forecast” for global economic growth and inflation, based on data available as of April 4 — including the reciprocal tariffs but excluding subsequent developments like the 90-day pause on higher rates and the exemption on smartphones — and updates the earlier outlook the IMF shared in January.
In its new projections, the IMF now calls for a US growth outlook of 1.8 percent in 2025, down 0.9 percentage point from its January forecast.
In addition to trade policy pressures, the IMF’s chief economist, Pierre-Olivier Gourinchas, added that the weakening consumer confidence and consumption indicators also factored in its downward revision.
While it is not yet calling for a recession in the US, Gourinchas told reporters Tuesday that the IMF now views recession odds at 40 percent, up from 25 percent in October 2024.
The IMF also cut back its global growth forecast to 2.8 percent in 2025, down 0.5 percentage points from its previous estimate.
“The April 2 Rose Garden announcement forced us to jettison our projections — nearly finalised at that point — and compress a production cycle that usually takes more than two months into less than 10 days,” Gourinchas wrote in the April report.
“The common denominator … is that tariffs are a negative supply shock for the economy imposing them,” he said. – CNBC
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