Trump tariffs will undercut U.S. growth and drag the world down, IMF says
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The U.S. economy is the big drag on global growth expectations this year, thanks in large part to President Trump's tariffs, according to forecasts released by the International Monetary Fund on Tuesday.
Why it matters: The estimates reflect the consequences from Trump's sudden reset of the world's trading system, with worse economic conditions expected in nearly every major country.
What they're saying: "Risks to the global economy have increased, and worsening trade tensions could further depress growth," IMF chief economist Pierre-Olivier Gourinchas writes in a blog post released alongside the group's World Economic Outlook.
By the numbers: The IMF expects the U.S. will grow by 1.8% in 2025, dodging a recession but slowing by a full percentage point relative to last year's growth rate.
- That is also about 0.9 percentage points below its forecast in January. Tariffs account for almost half of that downgrade, though policy uncertainty also weighed on growth, the IMF said.
What to watch: The IMF does not expect an imminent recovery, either.
- The U.S. will grow by 1.7% next year, it projected, cutting its most recent forecast by 0.4 percentage points.
Zoom in: The outlook reflects an abrupt reversal in global economic dynamics compared to a short period ago, when the U.S. economy was considered the world's most resilient.
- In the IMF's latest outlook, no advanced economy saw a bigger growth downgrade than the U.S.
- The growth downgrade came alongside a sharply higher inflation forecast of 3% this year, roughly 1 percentage point above the January estimates.
Zoom out: The IMF's outlook shows a broad slowdown that leaves few nations unscathed.
- Canada, for instance, will grow 1.4% this year — down 0.6 percentage points from the January estimate. Mexico is expected to fall into a deeper recession than initially anticipated.
The global economy is expected to grow by 2.8% in 2025, a slower pace than last year's 3.3% growth rate.
- In January, the IMF expected the global economy would hold steady with a 3.3% growth rate this year.
- The IMF revised down China's growth rate by 0.6 percentage points to 4%, though it expects government stimulus will help offset the trade war pain.
- U.S.-imposed tariffs will likely result in plummeting demand for its goods, putting more downward pressure on inflation than the IMF anticipated just a few months ago.
The intrigue: The IMF's base forecast does not reflect Trump's decision to pause reciprocal tariffs or the significantly higher tariff rates imposed on China since April 2.
- The freeze on reciprocal tariffs — even if it's indefinite — would not materially change the IMF's gloomy forecast.
- "This is because the overall effective tariff rate of the United States and China remains elevated even if some initially highly tariffed countries will now benefit, while policy-induced uncertainty has not declined," Gurinchas wrote in a blog post.
The other side: Without the "Liberation Day" tariffs, the IMF says the global economy would grow by 3.2% this year and next — a minor downgrade of 0.2 percentage points from their January forecast.
- The IMF says that global economic growth could improve notably "if countries ease their current trade policy stance and forge new trade agreements."
