The International Monetary Fund (IMF) has sharply revised its global economic forecast downward, citing rising trade tensions and increased financial instability risks sparked by new U.S. tariff measures under President Donald Trump. In its latest World Economic Outlook (WEO) released during the IMF and World Bank Spring Meetings in Washington, the Fund predicts global growth will slow to 2.8% in 2025 a 0.5 percentage point reduction from its previous forecast in January.
IMF Chief Economist Pierre-Olivier Gourinchas described the global economic environment as entering “a new era,” with the longstanding international trade system under pressure. “If sustained, increasing trade tensions and uncertainty will slow global growth,” he warned, highlighting the significant impact of the U.S.’s abrupt tariff hikes, especially those targeting China.
While the projections only account for tariff actions up to April 4, 2025, they already reveal widespread consequences. The U.S. economy is forecast to grow at just 1.8% this year — down nearly a full percentage point with growth expected to dip further to 1.7% by 2026. The Fund attributes this slowdown to “greater policy uncertainty, trade tensions, and softer demand momentum.”
China, the world’s second-largest economy, is projected to see growth fall to 4.0% this year, down from 5.0% in 2024, despite government attempts to stimulate the economy. Mexico faces a contraction of 0.3%, while Canada’s and Japan’s outlooks have also been significantly cut. In Europe, the eurozone’s growth forecast has been revised down to 0.8% for 2025, with Germany expected to record no growth at all.
Increased inflation is another concern. The IMF raised its inflation forecast for the U.S. to 3.0% this year and expects global consumer prices to rise as a result of the tariffs.
Despite the bleak outlook, Spain emerged as a rare bright spot in Europe, with upgraded growth of 2.5% this year. Meanwhile, sub-Saharan Africa’s growth is projected to slip slightly to 3.8% before rebounding in 2026.
As trade wars escalate, the IMF’s warning underscores the broader economic risks that protectionist policies can unleash across interconnected global markets.
