President Donald Trump’s aggressive trade strategy is casting a long shadow over the global economy, according to a stark new warning from the International Monetary Fund. In its latest World Economic Outlook, released Tuesday, the IMF downgraded growth forecasts for nearly every region, citing escalating tariffs and mounting uncertainty.
The report forecasts global expansion will drop to 2.8% this year, down from 3.3% in 2024 — well below historical norms. The United States, once a key driver of global momentum, is expected to see growth shrink to just 1.8% in 2025, compared to 2.8% the previous year.
The IMF made clear that Trump’s recent flurry of trade duties — which raised the average U.S. import tax to a century high — is a major factor behind the gloomier projections. Nearly half of the downgrade in U.S. growth, said IMF Chief Economist Pierre-Olivier Gourinchas, stems from these new levies. Even before the announcements, the mere uncertainty surrounding trade policy had begun to dent consumer and business confidence.
“These tariffs are delivering broad-based damage,” Gourinchas said, adding that their long-term effects will be “negative for all regions.” The IMF emphasized that the risks to the global economy are “firmly tilted to the downside.”
The Fund also revised its U.S. inflation outlook upward, now expecting a 3% rise this year — up from its 2% January estimate — partly due to the inflationary pressure of increased import costs. Many economists warn that easing interest rates now, as President Trump continues to urge, could further fuel inflation. The president has repeatedly called on the Federal Reserve to cut rates, recently launching a personal attack on Fed Chair Jerome Powell.
In response to questions about political pressure on central banks, Gourinchas underscored that “central bank independence remains a cornerstone,” suggesting that monetary policy should remain shielded from political interference.
The IMF said the report was finalized under “exceptional” circumstances, noting that Trump’s tariff rollout on April 2 forced them to discard near-completed forecasts and recalculate amid shifting policy ground. “We’re entering a new era,” Gourinchas told reporters, “as the global economic system that has operated for the last 80 years is being reset.”
Echoing the Fund’s concerns, European Central Bank President Christine Lagarde told CNBC that open trade has historically bolstered growth across continents. She warned that the ripple effects of U.S. tariffs will be felt in Europe too, though she does not foresee a eurozone recession.
While the IMF left the door open to a more optimistic outlook if trade frictions ease and new agreements bring clarity, the current trajectory, it says, is troubling. Without a de-escalation in trade tensions, the fund warns, the global economy may face not only slower growth — but prolonged instability.
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