The International Monetary Fund (IMF) has dramatically cut its global growth forecast, warning that Donald Trump’s tariffs have unleashed a “major negative shock” into the world economy.
The Washington-based lender now expects global growth of just 2.8 per cent in 2025, down sharply from its January projection of 3.3 per cent, as it warned that the recent surge in trade barriers has created unprecedented uncertainty for businesses worldwide.
“We expect that the sharp increase on 2 April in both tariffs and uncertainty will lead to a significant slowdown in global growth in the near term,” the IMF said in its latest World Economic Outlook released Tuesday ahead of its spring meetings in Washington.
US and China take biggest hits
The United States, where President Trump has imposed tariffs of up to 145 per cent on Chinese goods while introducing a 10 per cent tax on imports from most other countries, saw the largest downgrade among advanced economies. The IMF slashed its US growth forecast to 1.8 per cent for 2025, down from 2.7 per cent predicted in January.
IMF chief economist Pierre-Olivier Gourinchas said the probability of a US recession this year has increased to nearly 40 per cent, up from 25 per cent in October. Separately, the Institute of International Finance predicted “a shallow recession” in the US later this year.
China’s growth forecast was cut to 4 per cent from 4.6 per cent, as the world’s second-largest economy faces 145 per cent US tariffs and has retaliated with 125 per cent levies on American products.
UK growth downgraded but outpaces European peers
The UK economy is now expected to grow by 1.1 per cent this year, down from the IMF’s previous forecast of 1.6 per cent. Despite the downgrade, the UK is still predicted to outpace Germany, France, and Italy, though it will also suffer the highest inflation among advanced economies at 3.1 per cent.
Chancellor Rachel Reeves, who is attending the IMF meetings in Washington, said the forecast showed the UK remains “the fastest growing European G7 country” but acknowledged that “the world has changed.” She promised to be “defending British interests and making the case for free and fair trade” during her visit.
Conservative shadow chancellor Mel Stride called the outlook “a worrying indictment of Labour’s economic approach,” noting that “the IMF has downgraded the UK’s growth forecast, raising serious concerns about the lack of confidence and direction under Labour.”
Supply chain disruption and investment freeze
The IMF highlighted how uncertainty around trade policy was a “major factor” behind the growth downgrades, noting the potential negative impact on global trade given interlinked modern supply chains.
“Faced with increased uncertainty about access to markets – their own but also those of their suppliers and customers – many firms’ initial reaction will be to pause, reduce investment, and cut purchases,” Gourinchas said.
The fund noted that Trump’s recent “pause” on higher tariffs for dozens of nations did not “materially” change its gloomy outlook, as “the overall effective tariff rate of the US and China remains high and uncertainty about the policy continues.”
Finance ministers gathering in Washington for the IMF and World Bank spring meetings face mounting pressure to find coordinated solutions to reduce trade tensions, though it remains unclear what role the US might play given its “America first” approach.
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