IMF Slashes Global Growth Forecasts Amid Tariffs and Uncertainty in Global Economy

Global growth is now expected to hit just 2.8 percent in 2025, with trade disruptions and policy shifts dragging most countries’ outlooks down.

International Monetary Fund Headquarters in Washington on Aug. 4, 2023. Madalina Vasiliu/The Epoch Times

The International Monetary Fund (IMF) has lowered its global growth forecast for 2025 to 2.8 percent, down from 3.3 percent in its January estimate, pointing to evolving trade dynamics, rising policy uncertainty, and cooling momentum across several economies.

In its April 2025 World Economic Outlook, the IMF said most countries are expected to grow at a slightly slower pace than previously projected. While it described the current environment as “a critical juncture” for the global economy, the IMF emphasized that proactive policy coordination could mitigate downside risks.

The updated forecast accounts for trade developments announced through early April, including broad-based U.S. tariffs that have raised effective tariff rates to levels not seen in decades. The IMF said policy responses from other major economies have added to what it characterizes as elevated uncertainty—but stopped short of predicting a global recession.

“Despite the slowdown, global growth remains well above recession levels,” wrote Pierre-Olivier Gourinchas, economic counsellor and director of research at IMF. “Global inflation is revised up by about 0.1 percentage point for each year, yet the disinflation momentum continues.”

In this new reference scenario, global growth is projected at 2.8 percent in 2025 and 3 percent in 2026—a combined 0.8 percentage point cut from January’s projections. Global trade growth was revised down by 1.5 percentage points, to just 1.7 percent, less than half the pace seen in 2024.

Inflation is also expected to decline more slowly than anticipated, with global headline inflation now projected at 4.3 percent in 2025 and 3.6 percent in 2026, driven by higher costs associated with tariffs and continued supply disruptions.

The U.S. growth forecast was lowered by 0.9 percentage points to 1.8 percent in 2025, with nearly half of that drop directly attributed to the tariffs imposed since February. Growth is expected to ease further to 1.7 percent in 2026.

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

China’s growth was cut to 4 percent in 2025, a 0.6 percentage point downgrade, largely due to export disruptions and continued weakness in domestic demand. Inflation is expected to fall by 0.8 percentage points amid deflationary pressures.

The euro area is now forecast to grow just 0.8 percent in 2025, with Germany’s projection dropping to 0 percent, down 0.3 points. Spain was the only eurozone outlier, with its 2025 forecast raised slightly to 2.5 percent on strong consumption data.

In the UK, growth is projected at 1.1 percent in 2025—0.5 points lower than January’s forecast—as higher borrowing costs and weaker consumer spending take hold. Japan’s growth was revised down to 0.6 percent, a 0.5-point cut tied to the global trade slowdown.

Emerging market economies are also expected to slow. The IMF lowered the group’s 2025 growth outlook by 0.5 percentage points, to 3.7 percent. Mexico faces the steepest downgrade, with 2025 growth revised down by 1.7 points to minus 0.3 percent, largely due to its exposure to U.S. tariffs.

Looking further ahead, the IMF’s five-year global growth forecast remains stuck at 3.2 percent, well below the pre-pandemic average of 3.7 percent. Without major reforms, the Fund says, there is little sign of relief on the horizon.

“The swift escalation of trade tensions and uncertainty about future policies will have a significant impact on global economic activity,” the IMF said in its report.

It urged countries to restore clarity in trade rules, support demand where possible, and invest in long-term productivity to offset rising costs and aging populations.

Policymakers were also advised to safeguard central bank independence, preserve credibility on inflation, and use fiscal tools carefully. While disinflation is ongoing, new shocks or rising inflation expectations could force central banks to tighten policy again, complicating recovery efforts.