IMF warns Trump tariffs worsening US and global economic outlook

The International Monetary Fund has revised its economic outlook, warning that global and U.S. growth prospects have deteriorated due to rising trade tensions and policy uncertainty linked to President Donald Trump’s tariff strategy. According to the IMF’s latest World Economic Outlook, global growth for 2025 is expected to slow to 2.8%, a notable drop from its January projection of 3.3%. The global economy is projected to grow slightly stronger in 2026 at 3%, but this remains below previous expectations.

U.S. and China Feel the Strain

For the United States, the IMF now anticipates economic expansion of only 1.8% this year, a significant downgrade from its earlier 2.7% estimate. This represents a full percentage point decline from last year’s growth rate. Though the fund does not predict an outright recession, it has raised the likelihood of one occurring in 2025 from 25% to 37%. Private sector economists, including those at JPMorgan, estimate an even higher probability, with some placing the odds of a U.S. recession at 60%.

The IMF attributes the weakening outlook in large part to the sweeping tariffs introduced by the Trump administration in early April, targeting nearly 60 countries with a flat 10% duty. Although these tariffs were temporarily paused on April 9 for a 90-day review, the IMF indicated that the damage was already done. Given ongoing tariff escalations between the U.S. and China, the fund maintained its downbeat projections.

Pierre-Olivier Gourinchas, the IMF’s chief economist, emphasized that the global economic order is undergoing a fundamental shift. He noted that the current trade environment marks a departure from the open system that has defined international commerce for decades.

In China, economic growth is also expected to decelerate, with forecasts now predicting a 4% increase in both 2025 and 2026—down approximately half a percentage point from earlier estimates. The decline is primarily attributed to reduced demand as U.S. consumers cut back on imports from China. While the U.S. is facing a supply-side shock—similar to the one experienced during the pandemic—China is grappling with demand-side constraints.

Broader Global Impacts

The impact of tariffs is not confined to the U.S. and China. Inflation in the United States is projected to rise to 3% by year’s end, while in China, consumer prices are expected to remain mostly stable. In the European Union, the economic hit is less severe. The eurozone’s combined GDP across its 27 member states is forecast to grow 0.8% in 2025 and 1.2% in 2026. These figures are only slightly lower—by 0.2 percentage points—than the January predictions. Germany’s increased government spending is helping cushion the effects of U.S. trade measures.

Japan’s economy is also expected to lose momentum, with growth projected at 0.6% for both 2025 and 2026, down 0.5 and 0.2 percentage points respectively from earlier forecasts.