The International Monetary Fund (IMF) has issued a stark warning regarding the impact of US President Donald Trump’s unpredictable tariff policies, indicating that these could severely disrupt global economies, with the United States facing significant repercussions. In its latest World Economic Outlook, the IMF predicts a slowdown in global economic growth to 2.8 per cent this year, a decline from 3.3 per cent in the previous year, and significantly lower than historical averages.
Specifically, the US economy is expected to experience a notable deceleration, with growth projected at just 1.8 per cent in 2025, down from 2.8 per cent in 2024. These estimates are more pessimistic than earlier forecasts made in January, prior to Trump’s announcement of tariffs, which pushed the average import tax in America to its highest level in a century.
The IMF highlighted that rising trade tensions, combined with a high degree of policy uncertainty, are likely to undermine global economic activity. Risks to the global economy are seen as leaning towards the downside. The significant revisions in growth forecasts are largely attributed to Trump’s new tariffs, which account for nearly half of the downturn in the US growth outlook. The IMF’s chief economist, Pierre-Olivier Gourinchas, noted that the uncertainty surrounding these tariffs dampened demand within the US economy even before their implementation.
Furthermore, the tariff measures introduced by the Trump administration are not expected to yield any benefits in the long term, with adverse effects anticipated for all regions, including North America. Gourinchas stated this negative impact will be felt both in the immediate and distant future if the tariffs remain in place.
The IMF also mentioned that the latest World Economic Outlook was compiled under “exceptional” conditions, necessitated by the abrupt introduction of new tariffs on April 2. This development forced the IMF to overhaul its projections, which were nearly finalised at that time.
The institution underscored the critical role of trade in shaping the economic landscape, warning that escalating trade tensions and the uncertainty surrounding future trade policies could further hinder growth. In contrast, potential de-escalation of tariff rates and new agreements that promote clarity and stability in trade could result in positive economic outcomes.
Overall, the IMF’s findings highlight the urgency for a reconsideration of current trade policies to stave off further economic decline amidst a backdrop of increasing global trade friction.