News
22/04/25
Tariff ‘shock’ prompts IMF to cut growth outlook
Washington, 22 April (Argus) — Global economic growth is expected to be
significantly lower in 2025-26 than previously anticipated because of the steep
tariffs President Donald Trump is pursuing for most imports and the uncertainty
his policies are generating, the IMF said. The IMF, in its latest World Economic
Outlook released today, forecasts the global economy will grow by 2.8pc in 2025
and 3pc in 2026. That compares with the 3.3pc/yr growth for 2025-26 that the IMF
was expecting just three months ago. Today's forecast is based on the tariffs
that Trump had in place as of 4 April, before he paused steep tariffs on most
countries and escalated tariffs on China. These barriers had pushed up the
effective US tariff rate to levels "not seen in a century", the IMF said. While
Trump has altered his tariff levels repeatedly, he has imposed an
across-the-board 10pc tariff on most imports, a 25pc tariff on steel and
aluminum, a 25pc tariff on some imports from Canada and Mexico, and a 145pc
tariff on most imports from China. "This on its own is a major negative shock to
growth," the IMF said. "The unpredictability with which these measures have been
unfolding also has a negative impact on economic activity and the outlook." IMF
forecasts are used by many economists to model oil demand projections. The US
and its closest trading partners appear to be among those hardest hit by tariffs
and corresponding trade countermeasures. The IMF's baseline scenario forecasts
US growth at 1.8pc this year, a decrease of 0.9 percentage points from the
forecast the IMF released in January, reflecting higher policy uncertainty,
trade tensions and softer demand outlook. Mexico's economy is now projected to
shrink by 0.3pc in 2025, rather than grow by 1.4pc, while Canada's growth is
forecast at 1.4pc in 2025, down from 2pc. The release of the IMF report comes as
Trump has given no indications of a shift in thinking on tariffs, which he says
are generating billions of dollars for the US and will prompt companies to
relocate their manufacturing capacity to the US. "THE BUSINESSMEN WHO CRITICIZE
TARIFFS ARE BAD AT BUSINESS, BUT REALLY BAD AT POLITICS. THEY DON'T UNDERSTAND
OR REALIZE THAT I AM THE GREATEST FRIEND THAT AMERICAN CAPITALISM HAS EVER HAD!"
Trump wrote on social media on 20 April. The next day, major stock markets
indexes declined by more than 2pc, continuing their crash from when Trump began
announcing his tariff policies. Trump on 21 April escalated his attacks against
US Federal Reserve chair Jerome Powell for failing to lower interest rates as
Trump has demanded. There could be a "SLOWING of the economy unless Mr. Too
Late" — his nickname for Powell — "a major loser, lowers interest rates, NOW,"
Trump wrote. The IMF also ratcheted down its expectations for the Chinese
economy. China's economy is expected to grow by 4pc/yr in 2025-26, down from the
4.6 and 4.5pc, respectively, the IMF was anticipating in January. The euro area
is forecast to grow by 0.8pc in 2025 and 1.2pc in 2026, a decrease of 0.2
percentage points from the IMF's previous forecast. By Chris Knight Send
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