IMF Reduces Global Growth Projections Due to Tariffs and Economic Uncertainty

April 22, 2025 TruthUSA

Global growth is now expected to reach only 2.8 percent in 2025, as trade disruptions and policy changes weigh down the outlook for most countries.

The International Monetary Fund (IMF) has revised its forecast for global growth in 2025 to 2.8 percent, down from its January estimate of 3.3 percent, citing changes in trade dynamics, increased policy uncertainty, and slowing momentum in several economies.

In its April 2025 World Economic Outlook, the IMF noted that most countries are expected to experience slightly slower growth compared to previous projections. While acknowledging the current economic environment as “a critical juncture,” the IMF emphasized the importance of proactive policy coordination to mitigate potential risks.

The updated forecast takes into account recent trade developments, including widespread U.S. tariffs that have led to historically high effective tariff rates. The IMF highlighted elevated uncertainty due to policy responses from other major economies, but refrained from predicting a global recession.

“Despite the slowdown, global growth remains above recession levels,” stated Pierre-Olivier Gourinchas, economic counsellor and research director at the IMF. “Global inflation has been revised slightly upward each year, but disinflation trends continue.”

Under the new scenario, global growth is projected to be 2.8 percent in 2025 and 3 percent in 2026, representing a combined reduction of 0.8 percentage points from January estimates. Global trade growth has been revised down by 1.5 percentage points to 1.7 percent, less than half the pace seen in 2024.

Inflation is also expected to decrease at a slower rate, with global headline inflation projected at 4.3 percent in 2025 and 3.6 percent in 2026, driven by higher costs from tariffs and ongoing supply disruptions.

The U.S. growth forecast has been reduced by 0.9 percentage points to 1.8 percent in 2025, with nearly half of this decrease attributed to tariffs implemented since February. Growth is expected to further decline to 1.7 percent in 2026.

Meanwhile, the IMF raised its forecast for U.S. inflation by 1 percentage point, projecting 3 percent inflation in 2025, up from 2 percent in January.

China’s growth forecast has been lowered to 4 percent in 2025, a decrease of 0.6 percentage points primarily due to export disruptions and weak domestic demand. Inflation is anticipated to drop by 0.8 percentage points due to deflationary pressures.

The euro area is now projected to grow by just 0.8 percent in 2025, with Germany’s forecast dropping to 0 percent, down 0.3 points. Spain, however, saw a slight increase in its 2025 forecast to 2.5 percent based on strong consumption data.

In the UK, growth is estimated at 1.1 percent in 2025, 0.5 points lower than the January forecast, as borrowing costs rise and consumer spending weakens. Japan’s growth has been revised down to 0.6 percent, a decrease of 0.5 points linked to the global trade slowdown.

Emerging market economies are also expected to decelerate, with the IMF revising down their 2025 growth outlook by 0.5 percentage points to 3.7 percent. Mexico is facing the most significant downgrade, with its 2025 growth forecast lowered by 1.7 points to -0.3 percent, largely due to exposure to U.S. tariffs.

Looking ahead, the IMF’s five-year global growth forecast remains at 3.2 percent, well below the pre-pandemic average of 3.7 percent. Without substantial reforms, the IMF warns that there is little relief in sight.

“The rapid escalation of trade tensions and uncertainty about future policies will significantly impact global economic activity,” the IMF stated in its report.

The IMF urged countries to clarify trade rules, bolster demand where feasible, and invest in long-term productivity to counter rising costs and aging populations.

Policymakers were also advised to uphold central bank independence, maintain credibility on inflation, and prudently use fiscal measures. While disinflation persists, any new shocks or increased inflation expectations could necessitate central banks to tighten policy, complicating recovery efforts.

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