IMF Flags Tariffs as Key Risk to Global Growth

The International Monetary Fund has sharply downgraded its global economic outlook for 2025, attributing the slowdown to U.S. President Donald Trump’s expansive tariff regime and the resulting policy uncertainty. In its latest World Economic Outlook, the IMF projects global growth at 2.8% for 2025, down from 3.3% forecasted in January, marking the slowest pace since 2020 and the second weakest since the 2009 financial crisis.

The U.S. economy is expected to be among the most affected, with growth projections reduced to 1.8% in 2025 and 1.7% in 2026, compared to 2.8% in 2024. The IMF cites increased policy uncertainty, reduced consumer demand, and trade tensions as reasons for the slowdown.

The IMF attributes the downgrade to heightened “epistemic uncertainty” and policy unpredictability due to abrupt tariff hikes, which are part of the administration’s effort to overhaul trade relations and prompt renegotiations. However, these actions have raised concerns about recession and inflation.

The IMF warns that the tariffs have increased U.S. import duties to the highest levels in a century, affecting every country and disrupting global supply chains. The trade war has raised the odds of a U.S. recession to 40%, with private economists, like those at JPMorgan, estimating a 60% chance. Less-developed economies such as Mexico and South Africa are also expected to contract or experience slower growth. Inflation in the U.S. is projected to reach 3%. The IMF also highlighted increased global financial risks and warned that highly indebted financial institutions may become vulnerable in unstable markets.

The IMF also highlighted a surge in trade barriers, now at their highest in a century, and expressed fears of currency volatility and rising risks of recession, especially in the U.S., where the chance has climbed to nearly 40%. Amidst these concerns, the IMF urged international collaboration to ease trade tensions and support low-income countries, though the U.S.’s “America First” stance may complicate such efforts.

The IMF’s chief economist, Pierre-Olivier Gourinchas, noted that the policies Trump has promised to introduce “are likely to push inflation higher in the near term.” Big tax cuts could overheat the U.S. economy and inflation. Likewise, hefty tariffs on foreign products could at least temporarily push up prices and hurt exporting countries around the world.

The Organization for Economic Co-operation and Development sees a stagflationary economic scenario for the U.S. and its North American allies, with significant GDP downgrades across the continent and new price pressures as a result of tariffs and policy uncertainty. U.S. GDP growth will slow from “its very strong recent pace” of 2.8% in 2024 to 2.2% this year, and 1.6% in 2026, the OECD says. In the U.S., headline inflation will be 2.8% this year, the OECD projects — up from the 2.5% at the end of 2024 and 0.7 percentage point above the December forecast. Price pressures will remain in 2026, with inflation at 2.6%, roughly 0.6 percentage point higher than previously thought.

The IMF’s chief economist, Pierre-Olivier Gourinchas, wrote that the policies Trump has promised to introduce “are likely to push inflation higher in the near term.” Big tax cuts could overheat the U.S. economy and inflation. Likewise, hefty tariffs on foreign products could at least temporarily push up prices and hurt exporting countries around the world. And mass deportations could cause restaurants, construction companies and other businesses to run short of workers, pushing up their costs and weighing on economic growth.

The IMF’s chief economist, Pierre-Olivier Gourinchas, wrote that the policies Trump has promised to introduce “are likely to push inflation higher in the near term.” Big tax cuts could overheat the U.S. economy and inflation. Likewise, hefty tariffs on foreign products could at least temporarily push up prices and hurt exporting countries around the world. And mass deportations could cause restaurants, construction companies and other businesses to run short of workers, pushing up their costs and weighing on economic growth.

The IMF’s chief economist, Pierre-Olivier Gourinchas, wrote that the policies Trump has promised to introduce “are likely to push inflation higher in the near term.” Big tax cuts could overheat the U.S. economy and inflation. Likewise, hefty tariffs on foreign products could at least temporarily push up prices and hurt exporting countries around the world. And mass deportations could cause restaurants, construction companies and other businesses to run short of workers, pushing up their costs and weighing on economic growth.