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.
